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Last minute contributions to super before 65

Key points 

If you turn age 65 in a financial year whether you are able to make a contribution to superannuation depends on:

  • the amount you wish to contribute,
  • whether you wish to claim a tax deduction for all or some of the contribution,
  • whether you need to meet a work test during the year, and
  • quoting your tax file number.

 

There is often confusion around the size and timing of last minute super contributions into an SMSF in one’s sixty fifth year. But by following some simple steps, an easy route may be found to understand what’s required.

Before you reach 65 it is possible to make your superannuation contributions at any time or your employer can make contributions for you without any timing restrictions.

Once you are 65, the rules become a little more complex because work tests must be satisfied in the year the contributions are made. During the year you turn 65 knowing the rules can be important as they can be more difficult to understand.

Contributing in your 65th year

Once you reach 65 you must meet a work test of at least 40 hours in 30 consecutive days during the financial year to contribute. The amount of the contribution that can be made to super in your sixty fifth year is up to $540,000 for non-tax deductible contributions, if you meet certain conditions and up to a total of $35,000 of tax deductible contributions made to your super account(s).

If you wish to make a personal non-deductible contribution of up to $540,000 in your sixty fifth year, you will need to check the contributions you have made in the previous two years. The reason is that if you have made non-deductible contributions of no more than the standard cap of $180,000 in each of those years, you are able to use a two-year bring forward rule, which allows you to contribute up to three years standard contribution in the one year. The higher cap of $540,000 applies to non-deductible contributions in your sixty fifth year, even if you will not be working in the years you turn 66 and 67.

Examples

Meeting the work test in your sixty fifth year.

Contributing too much

Believe it or not, there is no limit to the amount of tax deductible and non-deductible contributions that can be made to superannuation.

However, there are some occasions when the fund is required to refund part or all of a contribution to you. This will occur if your non-deductible contribution to the fund exceeds your contribution cap – $180,000 if you are older than 65 and $540,000 if you are under 65.

And if the fund is able to accept the non-deductible contributions you have made and they are greater than the contribution cap that applies, you may end up having to pay a penalty tax on any excess that you make to the fund. In some cases you are able to receive a refund of the excess contribution or you may wish to leave it in the fund, if the rules permit.

Examples

Make sure you quote your tax file number

Quoting your tax file number (TFN) is very important if you wish to make personal contributions to super. If you don’t quote your TFN, the fund will not be able to accept any personal contributions no matter how much they are.

Putting it altogether

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*Once a person reaches 75 they can contribute up until 28 days after the month in which they turn 75.

They are the simple steps to make sure you don’t get caught up with contributions being refunded or facing tax penalties just because you contributed too much at the wrong time.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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