The government has placed extra restrictions on non-concessional contributions, limiting how much you can contribute and requiring that you are actively working before you do so.
Keep making contributions, if you’re still working
A non-concessional contribution is any amount you put into your super account from your after-tax income. If you make a deposit from your savings account, for example, directly into your super fund, that would be a non-concessional contribution. You are free to continue making non-concessional contributions after you turn 65 right up until you reach 75, at which point you can no longer do so. However, before you go making any extra contributions, you need to ensure you satisfy the work test, and be aware that the cap on contributions is different than when you were younger.
To continue making non-concessional contributions after reaching 65, you need to be able to meet the ‘Work Test’, showing that you still have gainful employment. To meet this test, you need to work at minimum 40 hours in a consecutive 30-day period in the same financial year you wish to make your contribution. This work can be self-employed or you can be an employee, but you must receive remuneration for the work you do – volunteer work doesn’t count.
Be aware of the contribution limits
If you meet this test, you can make as many non-concessional contributions as you wish in that financial year, up to the maximum contribution limit of $100,000 a year. You should note that once you are 65 or older, you can’t use the ‘bring forward rule’ to also access the contribution caps of future years; you can only make a contribution up to the annual limit. Additionally, you can’t make any contributions if you combined super balance reaches or exceeds $1.6 million, as of 30 June the previous financial year.
If you do exceed the contribution cap, the excess amounts will either be returned to you or you will pay the excess contribution tax at 49%. This is on top of the tax you have already paid, meaning you could potentially pay an effective rate of 98% on any excess contribution.
Just because you’re older doesn’t mean that you can’t keep growing your super. As long as you meet the requirements and keep in mind the maximum contributions, you can keep building your nest egg. You should also make sure to compare super funds, to ensure that your fund is the right fit for your needs.