Although the main purpose of super is to provide funds for you to use and enjoy in your retirement, you can still contribute to super in many situations when you’re retired. Whether you can depends on factors such as your age, the type of contribution you want to make, and contribution caps.
If you’re aged under 75, you’re eligible to make contributions to your super fund (including self-managed super funds) after you have retired.
However, if you’re over the age of 75, your super fund (including self-managed super funds) can only accept:
- downsizer contributions (i.e. if you sell your residential home and move to a cheaper, smaller home like the diverse range of accommodation options available in retirement villages or land lease communities)
- compulsory super guarantee contributions from your employer (for example, if you have only semi-retired and have begun a ‘transition to retirement’ strategy or if you only work every now and again).
The type of contribution you want to make
There are different requirements for tax-deductible super contributions after retirement and other types of non-tax-deductible contributions.
If you want to make a tax-deductible contribution, then you need to either:
- pass the ‘work test’, or
- qualify for an exemption from the work test.
To pass the work test, you must:
- be between 67 and 74 years of age
- work for at least 40 hours in a consecutive 30-day period during the financial year that you want to make the tax-deductible super contribution.
To qualify for an exemption from the work test, you must:
- you must have passed it in the previous financial year
- have a total super balance under $300,000
- never have had a previous exemption
While there are work test or work test exemption requirements for tax-deductible super contributions after you retire, there are no such requirements for super contributions that you don’t claim as tax deductions.
So, if you’re semi-retired and still earning income, you can still make non-concessional (i.e. after-tax) super contributions or salary sacrifice contributions that aren’t tax-deductible provided you’re under 75 and you don’t exceed your contribution caps. Let’s now take a look at those caps.
Because super earnings receive significant tax concessions in Australia (taxed at just 15%), there are limits (called caps) on how much you can contribute each year. The main caps you need to be aware of if you want to contribute to super in your retirement are:
- downsizer contributions, which are capped at $300,000.
- concessional (before-tax) contributions, which are capped at $27,500 per year (however, if your total super balance is less than $500,000, you can also contribute any unused cap amount from the previous 5 years on top of the $27,500).
- non-concessional (after-tax) contributions, which are capped at $110,000 per year, but you can contribute up to 3 times that amount in any one year by ‘bringing forward’ your cap for the next two years).
The bottom line
If you’re eligible, whether or not it’s a good idea to keep contributing to your super after you have retired or semi-retired depends on your specific financial situation and needs. You should get independent and professional financial advice to help you decide.
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