On 29 May 2020, the Government made regulations which increase the age at which contributions can be made:
- without meeting the work test, and
- on behalf of a spouse.
The measures are effective from 1 July 2020.
It is important to note that legislation will need to be passed by Parliament for the proposed changes to the eligibility age for the bring-forward rule for this to become law. This Bill proposes to allow individuals under aged 67 on the prior 1 July to trigger the bring-forward rule. Currently, this is only available to those aged under 65. It is proposed to commence from 1 July 2020.
The work test will no longer need to be met to make voluntary contributions to superannuation from 1 July 2020 for those aged 65 and 66. This means the work test requirements will align with Age Pension age which will be 67 from 1 July 2023.
The removal of the work test provides the opportunity for eligible clients to:
- make non-concessional contributions
- make concessional contributions including catch-up contributions
- implement the recontribution strategy
- manage tax, including capital gains tax
- claim the spouse contribution tax offset or co-contributions (if eligible)
- make contributions under the small business CGT concessions, and
- transfer foreign superannuation into an Australian superannuation account.
The age limit for spouse contributions will increase to 74. Currently, spouse contributions can only be made if the receiving spouse is under age 70. Additional flexibility will be provided by the removal of the work test for those aged 65 and 66.
This would enable spouse contributions to be made for the receiving spouse without the need to satisfy the work test up to age 67. From age 67 to 74, the work test would need to be satisfied by the receiving spouse.
Making spouse contributions is a simple strategy that enables that spouse’s superannuation to be boosted. This may be used as a means of equalising the superannuation interests of both members of the couple. It may also entitle the contributing spouse access to the spouse contribution tax offset.
There is no change to other criteria, such as the total superannuation balance, which will limit the ability to make non-concessional contributions.
Speak to financial adviser, Dev Sarker at 1300 717 136 today.
Source: MLC News and Updates, article published on: 01-06-2020