The Government has released a draft bill for consultation, outlining measures to provide greater flexibility in the superannuation system for older Australians.
The bill includes three changes:
• the age at which the work test starts to apply for voluntary concessional and non-concessional super contributions increases from 65 to 67;
• the cut-off age for spouse contributions is increased from 69 to 74; and
• individuals aged 65 and 66 can make up to three years of non-concessional contributions under the bring-forward rule.
The changes are to take effect on 1 July this year.
Under current rules, people under age 65 can bring-forward their annual non-concessional cap of $100,000 to two or three times the annual cap.
Under the new law, the cut-off age increases from 65 to 67. This means that individuals aged 65 and 66 who were not previously able to access bring-forward contributions will be able to do so, starting in the 2020/21 financial year.
Currently a regulated super fund can only accept an employer contribution or a member contribution in respect of a member aged 65 or 66 if that member was gainfully employed on at least a part-time basis during the financial year in which the contribution was made.
A person is “gainfully employed”, for superannuation purposes, if the person is employed for at least 40 hours in any 30-day period in that financial year. This rule is referred to as the work test.
Under the new legislation and regulations, the age range for the work test would change from 65 to 69, to 67 to 69.
In a statement accompanying the release of the draft bill, Assistant Minister for Superannuation Jane Hume says: “The Morrison Government is acting on its election promise to give Australians greater flexibility to contribute to superannuation as they approach retirement.
“The Coalition understands the realities of the modern workplace. Work patterns have evolved and more women are rejoining the workforce than ever before.”
The SMSF Association has come out in support of the changes. The association’s chief executive John Maroney says: “All these changes are wecome, recognising as they do the need for Australians to have greater flexibility as they transition to retirement.”
The deadline for submissions on the bill is April 3.