The Federal Government is aiming to boost the superannuation balances of retirees by relaxing the super contributions work test for one year.
To be able to make voluntary contributions to super, members aged 65 to 74 are generally required to work a minimum number of hours over the financial year, which is also known as the work test.
The proposed changes will make way for a one-year exemption from the work test that applies to super contributions in an effort to help recent retirees to boost their balances, the Government said. This is provided the individual satisfied the work test in the previous financial year.
Should the proposed regulation take place on 1 July 2019, individuals aged 65 to 74 years with total superannuation balances below $300,000 can also make voluntary contributions to their super for 12 months from the end of the financial year in which they last met the work test.
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Under the new law, a member is only eligible to access the first year of the bring-forward non-concessional contributions cap in a particular financial year if their non-concessional contributions - excluding any work test exemption contributions for that financial year - exceed their general non-concessional contributions cap.
According to the explanatory memorandum, non-concessional contributions are made from an individual's after-tax income or from income that has been taxed at their marginal rate. Non-concessional contributions are not included in the assessable income of the superannuation fund. Individuals can make non-concessional contributions to their superannuation because future earnings on these contributions will be taxed at the concessional rate of 15%.
However, to ensure superannuation is being used to increase individuals' income in retirement and not for tax minimisation or estate planning purposes, non-concessional contributions amounts are limited per financial year and general transfer balance caps limiting how much an individual's superannuation can be transferred into the retirement phase.
Treasury's consultation period is open until October 26.