The superannuation work test

Published: 31 October 2023

Product Technical & Regulatory Change

Risk mitigation is an important part of every financial advice strategy. Insurance is a tool to mitigate the impact certain life events can have on our finances and lifestyle during life’s journey.

If an individual holds insurance in a superannuation fund and is making contributions into their fund, it’s important that your advice considers the impact premiums have on retirement savings, both from an ethical perspective (standard 6 of the Code of Ethics) and compliance perspective (ASIC Report 413). This may include recommending additional superannuation contributions.

For older Australians to contribute to superannuation, one of the main requirements was to prove they were gainfully employed.

Gainfully employed is defined as working at least 40 hours over 30 consecutive days during the financial year in which an individual wishes to make a contribution to super. This is commonly referred to as the superannuation work test.

Australians under the age of 67 don’t need to meet the superannuation work test to make concessional or non-concessional contributions into their superannuation account.

On 1 July 2022, the superannuation work test requirement was removed for individuals aged 67 – 751 making non-concessional and salary sacrifice contributions (noting that superannuation funds can accept contributions up to 28 days after the end of the month in which the individual turns 75).

This change meant that from 1 July 2022, any individual under the age of 751 can make personal superannuation contributions or receive employer and/or spouse contributions, regardless of whether they were working. Normal contribution cap limits still apply.

However, we can’t completely forget about the superannuation work test. Individuals between the age of 67 and 75 who wish to make a personal concessional contribution into super and claim it as a tax deduction in the same financial year will still need to meet the above criteria. If they don’t meet the superannuation work test during that financial year, the tax deduction will be considered invalid, and the contribution will be considered a non-concessional contribution. However, there is the Work Test Exemption for members who meet certain conditions.

The work test exemption

Many Australians are working more flexibly and staying engaged in the workforce for longer. The government provides a superannuation work test exemption to help them get their financial affairs in order for retirement.

To qualify, an individual in their first income year after retirement must:

  • not have met the super work test
  • have a Total Super Balance (TSB)2 under $300,000 (the balance on 30 June of the previous financial year), and
  • not have previously used the work test exemption.

The work test exemption allows them to claim a tax deduction for any personal super contributions they make, being mindful of allowable maximum caps.

Reminder – Notice of Intent

Individuals who intend to claim a tax deduction for personal super contributions will still need to provide their fund with a valid Notice of Intent (NOI) form within the relevant time limits. Their fund must acknowledge the receipt of the notice before being eligible to claim the tax deduction through their tax return. The individual must still be a member of the fund at the time of claiming deduction and the total personal super contribution amount must still be in the fund. Also noting the impact if the member organises a rollover or goes into pension phase part way through the year. With Australians working longer and needing sound advice for retirement, these provisions allow advisers to help their clients with tax-effective superannuation planning while maintaining their valuable insurances.

1 Voluntary contributions can be accepted by a fund until 28 days following the end of the month in which an individual turns age 75.

2 Total Super Balance (TSB): An individual’s TSB for a financial year is the value, at 30 June of the previous financial year. This consist of all their accumulation or pre-retirement phase accounts, retirement phase accounts, such as account-based pensions, and funds in the process of being transferred from one super account to another (known as ‘in-transit rollovers’).