The Work Test & Work Test Exemption
If you are planning on making ‘personal contributions’ and all non-mandated contributions to your Superannuation Fund or if you would like to transfer your UK Pension to Australia, then you must be aware of the rules involving the work test and the work test exemption in order to be eligible.
In this article, we will cover the main points you need to know:
The Work Test
If you are between the age of 67 and 74 you must meet the requirements of the ‘work test’ if you want to make a personal and all non-mandated contributions to your superannuation fund. In summary – you must have been employed for at least 40 hours in a period of not more than 30 consecutive days during the financial year to pass the work test.
Contributions include personal contributions, salary sacrifice, spouse contributions and also a transfer of funds from an overseas scheme, whether it be a UK pension transfer or a transfer from an existing Qualifying Recognised Overseas Pension Scheme (QROPS). A rollover from an existing superannuation fund which contains a UK pension sourced amount is not considered to be a contribution by the receiving rollover fund and therefore not caught by work test requirements.
Where you meet the criteria of the work test, this will apply for the full financial year, however you must confirm your eligibly to make the contribution i.e. meet the work test or the work test exemption, before the fund can accept the contribution or transfer of funds (i.e. a non-concession contribution). If not, the amount must be returned within 30 days.
On 1 July 2020 the age of the work test moved to age 67 from age 65 meaning that those aged 65 and 66 during the 2020/2021 tax year can now make contributions or transfer their UK pension, without having to meet the work test requirements.
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The Work Test Exemption
Another important factor to consider is the ‘work test exemption’, which took effect from 1 July 2019. To meet the criteria, you must have:
- Satisfied the work test in the financial year preceding the year in which you made the contribution.
- Have a total superannuation balance of less than $300,000 at the end of the previous financial year.
- Not previously used the work test exemption.
If any of the above applies to you then you may contribute to your super without having to meet the requirements of the work test.
Assuming that you are between the age of 67 and 74 and that you meet the requirements of the work test or are eligible for the work test exemption, then the following contribution types may be added to your superannuation fund:
- Non-mandated employer contributions – These are contributions made by your employer that are above the Superannuation Guarantee (SG).
- Salary Sacrifice – These are contributions made on your behalf by your employer form your pre-tax income.
- Personal contributions – These include contributions made by you as the member. These also include transfers from overseas pension schemes.
- Spouse contributions – This is a contribution made to your fund on your behalf from your Spouse.
- Government co-contributions – If you are a low or middle earner and wish to make a personal contribution to your Superannuation fund, the government may also contribute up to a maximum of $500.
- Downsizer contributions – These are contributions that can be made from the proceeds of selling your home, you may contribute up to a maximum of $300,000 in the 2020/21 financial year. These are not classed as non-concessional contributions, hence they will not count towards your contribution caps.
Once you are over the age of 75, you generally cannot make personal contributions to your Superannuation Fund, unless its within 28 days of your 75th birthday.
If you would like further information regarding the work test or the work test exemption in order for you to contribute to your Superannuation Fund, contact us today and a member of our team will be happy to help you.
This article does not contain personal or financial advice. It is provided for general information only and does not take into account your personal objectives, financial situation or needs. IVCM is not authorized to provide you with any personal or financial advice.
If you require financial any advice then you must make sure that you obtain advice from a suitably qualified financial adviser.