Australians close to retirement will have the opportunity to contribute more money into their superannuation should several new measures announced in the Federal Budget become law.

The government has revealed three key changes to super policy, broadly amending certain age and work test requirements while also extending the ability to bring-forward non-concessional superannuation contributions. These changes will give Australians more flexibility and the ability to contribute more money into super as they near retirement.

AMP Technical Strategy Manager Fabian Bussoletti has analysed the budget papers and made the following key findings.

Work test abolished for Australians aged 65 and 66

The government has announced from July 2020, people aged 65 and 66 will be able to make voluntary concessional and non-concessional super contributions without having to first meet a work test.

Currently, when Australians reach age 65, the ability to make superannuation contributions becomes more difficult as there is a requirement to meet a work test of 40 hours over a consecutive 30-day period.

“Abolishing the work test for those aged 65 and 66 gives people more time to make super contributions both concessional and non-concessional.

“They may have the ability to continue making super contributions to better position themselves in the lead up to their retirement from both a tax and social security perspective,” Mr Bussoletti said. 

For example, this measure may assist people when implementing strategies such as:

• Making personal deductible contributions to manage personal tax liabilities, which may also include catch-up concessional cap contributions.
• Contributing the proceeds from the sale of large assets (including the family home and small business assets) and inheritances.
• The re-contribution strategy.
• Short-term Centrelink asset-sheltering strategies.

Age limit increase for spousal contributions

The government also made a commitment to increase the age limit for spousal contributions from 69 to 74 years.

Under current law, those aged 70 or more cannot receive contributions from their spouse.

Mr Bussoletti said: “This proposed measure means someone looking to prop up their working partners super will now have more time to do so. Similarly, it will also provide couples with greater opportunities to equalise superannuation balances before commencing retirement pensions.”

Bring-forward arrangements age limit increased

And finally, the government has also announced that people aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule. Currently this ability is broadly restricted to those under age 65.

“By extending the age limit where people are able to take advantage of these bring-forward arrangements, the government is providing increased opportunity for Australians to make super contributions even when they are very close to retirement as part of their overall retirement planning,” Mr Bussoletti said. 

The annual non-concessional contribution cap is currently set at $100,000. However, the bring-forward arrangements broadly allow eligible Australians to make up to three years’ worth of non-concessional contributions into super in one year. This enables a maximum non-concessional contribution of up to $300,000 by bringing forward up to the next two financial years’ non-concessional contribution cap.