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Crystal Wealth Newsroom

Super contributions update 2021

Money Tips

Opportunities to contribute without meeting the work test after age 65

If you are aged 65 to 66 you may now contribute without meeting the work test.

“You may make voluntary concessional contributions that are pre-tax and personally deductible,” says Priscilla Bayly, Advice Consultant at Crystal Wealth Partners.

 “You may also make non-concessional contributions provided your Total Super Balance (TSB or total of all of your super benefits) does not exceed  $1.6million as at 30 June 2020.”

If you are aged 67 to 74 and have a TSB of less than $300,000 as at 30 June 2020, and you met the work test in 2019-20, you are eligible to contribute in 2020-21 without meeting the work test under the work test exemption.

Concessional Contribution Catch Ups

If you did not fully utilise your concessional contribution cap of $25,000 in the last two financial years, you are able to use the remainder of the prior year caps. To do so, your Total Super Balance (TSB) must be under $500,000 as at 30 June 2020.

“As these contributions are deductible, this provides an opportunity for a larger deduction and tax saving this year,” says Priscilla.

“For example, if you contributed $15,000 in 2018/19 and $15,000 again in 2019/20, you would have a further $20,000 available to contribute this year on top of the $25,000 annual cap, bringing your total possible concessional contribution to $45,000.”

The opportunity to carry forward unused concessional contribution amounts is on a five-year rolling basis. Therefore the $10,000 unused in 2018/19 can be carried forward as far as 2023/24.

The TSB requirement of under $500,000 at 30 June of the previous year must be met in the year you wish to use carry-forward amounts. This may be very useful if you have a one-off large capital gain and are able to make personal concessional contributions to minimise tax.

Bring forward non-concessional contributions

Currently, the non-concessional cap is $100,000 per financial year. You may also take advantage of the bring-forward rule, which allows you to bring two years’ forward and contribute $300,000.

You must be under 65 years old and not previously triggered the bring-forward arrangement in the past two years. Your TSB must also be under $1.4 million as at 30 June 2020. If your balance was between $1.4 million and $1.5 million you can contribute up to $200,000. Otherwise the maximum is $100,000.

“Legislation is currently in parliament to allow 65 and 66-year-olds to utilise the bring-forward rule and is likely to become law come February,” says Priscilla.

“If it is legislated you will be able to bring forward contributions before turning 67 without meeting the work test.

“This may create further capacity to contribute for people selling their home.”

Currently you are able to make a downsizer contribution of up to $300,000 after age 65 without meeting the work test, in addition to the concessional and non-concessional contribution caps.

For a couple aged 65-66, this would increase their opportunity to contribute to $1.25 million compared to $850,000. (2 x concessional $25,000 + 2 x non-concessional bring-forward $300,000 + 2 x downsizer $300,000.) Please note, there are requirements that must be met to access the downsizer contribution.

Contribution cap indexation

The concessional cap will be indexed on 1 July 2021 to $27,500. The non-concessional cap will increase to $110,000 (being 4 times the concessional cap).

“This would allow for $330,000 to be contributed under the bring-forward rule in 2021/22,” explains Priscilla.

“This may mean it is beneficial to wait until 2021/22 to trigger the bring-forward rule if you are not limited by age restrictions.”

Spouse contributions

By making a non-concessional contribution on behalf of a spouse, you may be eligible to claim a tax offset of up to $540 a year. The age limit for spouse contributions has been extended by five years to 74, but the spouse must meet the work test or the work test exemption.

If you’d like some guidance around how to make the new super contribution regulations work for you, give the Crystal Wealth team a call.

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