12 month superannuation work test exemption to apply from 1 July 2019

Older Australians will have a limited exemption from the superannuation ‘work test’, with the Government making regulations to implement the measure.

The ‘work test’ limits the ability of older people to make superannuation contributions to those that are working more than a certain amount.

The Coalition had announced the complete repeal of the work test in the 2016/17 Budget, but this was later dropped. In the 2018/19 Budget a much more limited exemption from the work test was announced, and has now been implemented.

From 1 July 2019 Australians aged 65 to 74, and with a Total Superannuation Balance under $300,000, will be able to make voluntary super contributions for 12 months from the end of the financial year in which they last passed the work test, says Assistant Treasurer Stuart Robert.

“Total superannuation balances will be assessed for eligibility at the beginning of the financial year following the year that they last met the work test. Once eligible, there is no requirement for individuals to remain under the $300,000 balance cap for the duration of the 12 month period,” he said.

The existing concessional and non-concessional contribution caps with continue to apply to contributions made under this work test exemption. The concessional contribution cap carry forward rules can also be used during the 12 months, according to the Minister.

“Following feedback from stakeholders on the draft legislation, the Government has decided to allow those who use the work test exemption in the year they turn 65 to access bring forward arrangements for non-concessional contributions,” said Minister Robert.

“These individuals will be able to make up to $300,000 in contributions from after-tax income, providing extra flexibility to get their affairs in order as they prepare for retirement.”

“This change will also align the contribution rules for the work test exemption with those that apply under the work test, making the system simple to understand for members.”

This is a change from the draft rules, the draft materials to which said: “It is not intended that the work test exemption be used to provide benefits equivalent to providing an additional three years to make voluntary superannuation contributions.”

However this would have required passing legislation, it appears, whereas the final version of the rules can simply be made with regulations. The Government has had difficultly in getting the votes for its superannuation legislation in the Senate.

The Explanatory Statement to the regulations say that stakeholders involved in the consultation on the draft rules were “generally supportive of the proposed changes”. Though Treasury has yet to publicly release the submissions.

Meaning of a superannuation income stream benefits

The Government also made regulations to confirm the meaning of ‘superannuation income stream benefit’.

“The determination of whether a superannuation benefit is a superannuation lump sum or superannuation income stream benefit is a key factor in determining the tax treatment of the superannuation benefit,” said Minister Robert.

“This amendment allows superannuation funds to continue to claim the earnings-tax exemption on certain assets.”

“The Government has made amendments to ensure the superannuation tax law continues to operate as intended when originally drafted and is consistent with existing industry practice.”

“The amendments will ensure that the provisions concerning superannuation income stream benefits have always operated, and will continue to operate, as intended.”


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