Superannuation age limits: What are the rules?

The rules of superannuation vary according to your age and can have an impact on how much you can make in contributions and when you can access your super.

Age generally comes into play during three stages of your life:

• when you first earn super
• when you want to make extra contributions
• when you want to access your super.

When can you earn super?

The Australian Taxation Office (ATO) says most people start earning super when they start their first job. Depending on how old you are and how much you earn, your employer may be required to make a mandatory contribution, known as the Superannuation Guarantee, to your preferred super fund.

If you’re aged 18 or over and earn more than $450 in a calendar month then your employer must make this contribution. It doesn’t matter if you work full-time, part-time or casual.

If you’re aged under 18 then you must meet the same conditions but also work more than 30 hours per week to be entitled to mandatory super contributions.

The Federal Government has announced plans to scrap that $450 threshold. So from 1 July, 2022, even if you earn less than $450 per month, you will get the Super Guarantee from your employer so long as you meet any other eligibility requirements.

Read More: How to open a super account

You can choose which super fund you want your employer to pay your super contributions into. Your employer may suggest a super fund for you but you don’t have to accept that. If you don’t nominate a super fund when you start work, your employer must take steps to check if you already have a fund, known as a stapled fund.

When can you make extra contributions to your super?

Once you’ve started earning super you can make extra voluntary contributions throughout your working life. This is a great way to potentially boost your super balance for when you retire.

If you’re a low to middle-income earner you may be entitled to some extra contributions from the government.

But there are some limits on how much extra you can pay without having to pay extra tax. These are known as contribution caps.

There are two main types of voluntary contributions you can make, known as concessional (before-tax) and non-concessional (aftertax) contributions.

Concessional contributions

Concessional contributions are payments that come out of your earnings before you pay tax, such as your employer’s Super Guarantee contributions. You can opt to pay more from your pre-tax earnings through a process known as salary sacrificing.

From 1 July, 2021, the ATO says the concessional contributions cap is $27,500 a year. You may be able to pay more if you didn’t use the full amount of your cap in earlier years, by carrying forward the unused portion of your cap from those prior years. You can check if you have any excess cap available via your myGov account.

Note, from 1 July, 2017 to 30 June, 2021, the annual concessional contributions cap was lower, at $25,000.

You may have to pay extra tax if you exceed your concessional contributions cap, or if your combined income and any concessional contributions are more than $250,000.

Non-concessional contributions

Non-concessional contributions are any money paid into your super that has already been taxed, such as any payments you make from your after-tax earnings or savings.

From 1 July, 2021, the ATO says the non-concessional contributions cap is $110,000 a year. Prior to that it was $100,000 a year. But if your super balance is $1.7 million or higher in 2021/22 then your cap is $0.

You may be able to contribute up to three times your non-concessional contributions cap under the bring-forward rule, depending on your age and so long as you meet the ATO’s eligibility criteria.

Again, if you exceed your cap you may have to pay extra tax.

When can you access your super?

To gain access to your super fun you first need to reach your preservation age, which varies depending on when you were born.

Your preservation age

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Source: ATO

You don’t immediately get access to your super once you reach your preservation age. You need to meet other conditions of release, such as retiring from your job. Once you reach 65, you can access your super, even if you haven’t retired.

The ATO says there are some circumstances where you may be able to get early access to your super. They include access on compassionate grounds for things such as medical treatment or palliative care, if you’re in severe financial hardship or if you suffer a temporary or permanent incapacity.

The ATO warns to be wary of any scheme claiming to offer early access to your super by transferring your super into a self-managed super fund (SMSF).

“These schemes are illegal and heavy penalties apply if you get involved,” it says.

Regardless of whether your super is in a traditional super fund or an SMSF, the same rules apply around when you can access it, and opening an SMSF involves taking on a number of additional costs and responsibilities.

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