Q. Help, I’m 76 and want to contribute more to my super, but I’ve been told I can’t!
This was the cry for help we received from Albert last week. He had just won $45,000 in a lottery and doesn’t want to spend it. Instead, he would like to put it into his super. A friend told him that once you turn 75 you can no longer make any contributions. Is this right?
Says James:
I think super is a terrific way to save for retirement. You start a job and your employer is legally obliged to contribute into your superannuation account – currently 11.5% of your ordinary time earnings and increasing to 12% on 1 July 2025. It’s a tax-effective environment, it compounds over your lifetime and there are even bigger tax advantages if you turn these savings into an income stream in retirement.
However many people who have already retired won’t have had the advantage of super all their lives. They are often playing catch-up. And getting money into super isn’t quite as simple once you have retired. But it’s not impossible if you understand the rules.
Because of the tax advantages of super there are limits to how much you can put in both when you are working and also after you have retired. And the rules change as you pass different age milestones, so here’s a brief summary of the main rules:
Lump sum after tax contributions.
You can make up to $120,000 each year in after-tax contributions to your super. This could come from your bank account, the proceeds of the sale of your home, an inheritance or perhaps from other investments. If you are aged under 75 you are eligible to make a non-concessional contribution even if you are not working. Depending on your superannuation fund they may also be able to accept contributions until 28 days after the end of the month you turned 75, however, it’s best not to leave your contribution until the last minute.
If, like Albert, you are over 75 the only contributions possible are those made by your employer as the Super Guarantee and any Downsizer contributions if you’ve sold your home.
Bring forward contributions.
This allows you to ‘bring forward’ up to three years’ worth of those after-tax contributions outlined above (i.e. $120,000 per annum) and make a single $360,000 dollar contribution. That would make a really big boost to your super. You can do this right up to age 75. There are some tricky rules around this if you inadvertently exceed one year’s limit so it’s worth talking to an adviser to get some guidance here.
Now these are some pretty big numbers and most people don’t have the capacity to boost their super by those amounts which brings us to …
The Downsizer Contribution.
For many Australians their home is their most valuable asset. And many look to sell their home when they finish work, separate, or the kids leave home. If you do choose to sell your home you could take advantage of what is known as the Downsizer Contribution. This is where you can take up to $300,000 of the proceeds (for couples this is $300,000 each) from the sale of your home and put this into super. Some conditions apply, such as having to make the contribution within 90 days of settlement. This is available to people over age 55 and the even better news is that there is no upper age limit. Selling your home might also give you enough money to use the bring forward provisions as well as the downsizer. In theory someone could make a downsizer contribution of $300,000 and an after-tax contribution of $330,000 totalling $630,000. That’s a lot of money but some people downsizing from valuable homes might be in a position to do that. They will need to stay under the total super balance limit of $1.9 million though
So what are the other main ways to boost your super?
Salary sacrifice contributions.
If you are still working, and under age 75, your employer will be making contributions to your super account. You can top these up with salary sacrifice contributions (pre-tax contributions). These contributions will only be taxed at 15% if your total of employer and salary sacrifice contributions stay below the current concessional limit of $30,000. You can also claim a tax deduction on some after-tax contributions if you haven’t exceeded your pre-tax contribution limit.
Carry forward contributions.
This is another catch up contribution that helps enable people to boost their super and potentially reduce tax. Often people late in their career who have paid off their mortgage, or are seeking to offset a Capital Gains Tax(CGT) bill, find themselves in a position to contribute a lot more to super. This provision enables someone with less than $500,000 in super as at 30 June of the previous financial year to carry forward previous years unused pre-tax contributions – up to five previous years – and use them in later years. In your MyGov account, under ‘superannuation’ you will see the amount of ‘unused pre-tax contributions’ you have available to use.
Now many of the contribution amounts outlined above may look very high but they do highlight that it is possible, in certain circumstances, to make a really significant boost to your super in later life. You could have sold your home, or perhaps other investments. You might have received an inheritance or are just enjoying the cash flow advantages of reduced expenditure on kids and the mortgage.
So let’s look at an example of how this would work for four members of the local bowls club, Terri, Bao, Frank and Maria. They all want to know how to get more money into super. What options are available to each of them?
Terri
Terri is 60, still working, rents her home and has $150,000 in super which is well below the total super balance cap of $1.9m. This means all of the options outlined above are still available to her, except for the Downsizer Contribution.
Bao
Bao is 65 and no longer working. He owns his own home and has $250,000 in super. As he is no longer working he won’t receive contributions from an employer and he won’t be able to make salary sacrifice contributions. As a homeowner he could sell his home and make a Downsizer Contribution.
Frank
Frank is 68, a homeowner and no longer working. He has $2 million in super. He can make Downsizer Contributions however any further after-tax contributions will exceed his cap and he will most likely receive an excess contributions tax assessment from the ATO. He can withdraw those contributions or else face paying the highest tax rate on those contributions. It’s worth checking carefully before making additional contributions once you exceed the cap. Our advisers can help explain the rules. If he returned to work he could still receive employer contributions and make salary sacrifice contributions.
Maria
Maria is 76, a home owner and stopped working a few years ago. She has $350,000 in super. The only contribution option available to Maria, even if she returned to work, is the downsizer option.
We can’t address everything here, but will write more about these rules in the future. In the meantime our advisers can talk to you about what your retirement forecast could look like and the options available to you to boost or at least get your super working for you.
Have you done anything later in life to give your super a boost?
If not, do you think you could take advantage of any of these ways to boost your super?
This article is provided by Retirement Essentials Representative Number: 001260855. We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859. This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.
I don’t see the $27,500/year contributions you can make after you retire. Up until this year you needed to complete the work test of 40 hrs in a 30-day period, but that requirement is now scrapped. Both my husband and I took advantage of this until we were 75 years old. Has the amount been increased to $120,000 ?
Hi Christine, sounds like you would have been making contributions which are personal contributions you could then claim as a tax deduction and they count towards the concessional contribution cap. The current annual cap for this type of contribution is $30,000 for this financial year.
You won’t need to meet a work test when making the contributions, but after age 67 you do still need to meet a work test to be eligible for the tax deduction in your tax return.
Where you aren’t claiming a tax deduction on the amount you contributed to superannuation, they remain counted as personal contributions in the non-concessional annual cap which is $120,000 this financial year. These contributions have a bring forward rule which allows you to make up to three years worth of contributions ($360,000) in one lump sum.
Both of these types of contributions will be accepted by your fund until the 28th day following the end of the month when you turn 75.
After 75, your fund can always accept a downsizer contribution and any employer mandated contributions.
My wife and I are both aged 70 and both of us retired from our careers five years ago, we no longer work, generate personal income or pass any work test (if there still is one). We have an investment property (unit) in my wife’s name which we’re selling. We’ve owned the unit for ten years. Once sold, the profit should be around $ 175,000. Less the 50% CGT exemption brings this down to $ 87,500. This will be just about all of her income in this financial year. Can my wife make a concessional contribution to her superannuation account of $ 30,000 as a one-off contribution to offset some of the CGT?
Hi Rob, Once you are 67, you do need to meet a work test to be eligible for the tax deduction on contributions made to super that you are claiming as concessional contributions under the $30,000 annual cap for this financial year.
Thanks for all your help. Could you please tell me if you can add money from an inheritance?
Hi Leanne, yes you can. I’d recommend you review your current financial situation before you decide what to do with an inheritance. Once you receive an inheritance in Australia it is your money, if you are contributing part or all of it to super, the normal rules apply regarding the contribution caps and age limits.
Great information thank you. I’m curious as to what advice Albert was given?
A very helpful article. Question is the Lottery win or say an after tax contribution of $45k going into super taxed at 15%.
Hi Johnny, Thanks for your comments.
if you were making a personal contribution of funds from a lottery winning into superannuation, they could be made as a non-concessional contribution up the the single financial year cap of $120,000. This type of contribution is not subject to the 15% contribution tax that concessional contributions are. It’s not taxed by the fund when contributed, and also forms part of the tax-free component.
If you were to claim a tax deduction for up to $30,000 (2024 financial year) of contributions you’ve made as a personal contribution, they then become concessional contributions and are subject to the 15% contribution tax.
Thankyou…such a helpful article! I have retired. My husband will later in 2025. We have an investment house and were wondering when was the best time to sell it in order to minimise Capital Gains Tax? At first we thought after we both retired. Now we realise we could have made use of the 3 year personal contribution clause since each of our Super is under $300,000, except that I retired in April 24, so now have only this tax year to use the personal contribution scheme to reduce Capital Gains Tax. We have tenants and don’t think we can sell it before July 2025 since it needs some fixing up after they leave. We bought it for $415K and it’s worth $850K. Any suggestions would be welcome.
Thanks Sandra, glad you found the article helpful. I’d say you might benefit from one of our strategy consultations looking at the bigger picture of your options and managing super in retirement.
In general whilst you are under 75, you can make contributions to superannuation without meeting the work test, but you can only claim a tax deduction on contributions up to the relevant financial year concessional contribution cap ($30,000 in 2024) if you have met the work test definition: being gainfully employed for 40 hours or more in any 30-day period in a financial year.
You have until up to 28 days after turning 75 to make contributions to super – including personal (non-concessional) contributions of up to $360,000 in one financial year using the bring forward rule to make three times the annual cap of $120,000.
Hello….could you please give a scenario of my circumstance….which is I am 71, not working, have a small amount in super but would like to put in $150,000 into my super from my bank account. I am not like Frank who would exceed his cap.
Thanks.
Regards Lynn
Hi Lynn,
As you are under 75 you can make lump sum contributions to super using the bring forward rules. They allow you to make up to three times the current financial year cap of $120,000 this year for this type of contribution – so as much as $360,000 in one lump sum.
Since 1 July 2022 you no longer need to meet the work test to make the contribution. However, as you are not working you cannot claim a tax deduction on any of your contributions. To claim a tax deduction, the work test definition is to be gainfully employed for 40 hours or more in any 30-day period in a financial year.
In regard to the downsizer contributions I understand that you have to have lived in your house for 10 years. Is this correct? Also, the super balance limit of $1.9 million is not something that I was aware of. Is that per couple or each. We have a self-managed super fund that is in excess of that at current share prices. So, we cannot contribute any further when downsizing?
Hi Harold,
Yes you are right about 10 years. You, your spouse or former spouse must have owned the property for at least 10 years and be eligible for the main residence CGT exemption (either in full or partially). There are other rules that apply though which will need to be met.
Downsizer contributions made into superannuation do count towards the total super balance and in the $1.9 million transfer balance cap (the limit on the amount of superannuation you can move into the tax-free pension phase). However they can still be made even if your total super balance is more than $1.9 million because they are not counted in the concessional or non-concessional caps.
The caps that apply are per individual, so each rather than per couple. Your Total Superannuation Balance and Transfer Balance Cap can be checked with the ATO via your myGov account, but be careful to check the values shown are accurate and reflect your most up to date contributions and transfer balance amount.
If your superannuation is in a pension or retirement income stream, then there are several rules that apply to calculating the transfer balance amount that is current for you. I would suggest you check with your SMSF accountant or administrator or seek advice to help calculate your balance if you think you are close to the limit.
Please could you clarify. You have written “the 1.9 m super balance cap”. Please Confirm you mean that is the maximum that can be in an Account Based Pension. Isn’t that called the Transfer Balance Cap? You can have any amount in accumulation mode, can’t you? The restriction is on the amount you can move to ABP mode isn’t it? Your total super balance = all accumulation funds plus all ABP funds. So you can have up to 1.9 in ABP and as much as you want sitting in accumulation, as well. Until future years when they *might* increase the Transfer Balance Cap. Then, you may have to commute some of your ABP backwards into accumulation mode, in order to be granted some or all of the increase in the TBC. thank you for clarifying.
Hi Helly,
Yes, certainly it’s a complex area, so I would suggest seeking advice in working out the impact for your own situation.
The total superannuation balance (TSB) is the individual’s total benefit amount held within the super system and includes benefits held in the accumulation and retirement phases.
If your total superannuation balance as at 30 June of the previous financial year is $1.9 million or more, any non-concessional contributions you make will be treated as excess non-concessional contributions taxed at 47% if not withdrawn.
Downsizer contributions are not a non-concessional contribution and will not count towards either the non-concessional or concessional contribution caps. The downsizer contribution can still be made if your total super balance is $1.9 million or more. However, once made it will then be included in your total super balance as monitored by the ATO when it is recalculated at the end of the financial year.
The transfer balance cap (TBC) is a lifetime limit on the amount you can transfer into one or more retirement or pension phase accounts where the earnings on assets are received tax free. The transfer balance cap is $1.9 million this financial year.
The transfer balance account (TBA) is the account record of how much super an individual has transferred into retirement phase accounts, it is a series of credits and debits, and in many cases will just be the one credit when the individual moved their superannuation account into pension account.
What effect would renting our home out and moving into a granny flat at the rear of our daughters home have on our pension
Hi Enio, if you were to do this then the income you receive from rent would be assessable and your home would also be assessed as an asset based on it’s private sale value.
Hi. I retired in 2018. I am 73. Thanks to being in a super plan since I was 18 I have a decent nest egg for myself and wife Just on $1million).
My wife retired 20 years ago She has an annuity paying around 700 to 800 per fortnight and savings from an inheritance and from a lump sum when she retired.
We own our home outright (I bought it in 1979 before we married). I also have two rental properties, one fully paid off and one I have enough to pay it off in the bank, so I don’t pay any interest on that loan (yes, it’s a good loan and anyone can do it!). Both houses bought after the CGT rules came in and have been rentals all the time I have owned them.
I wish to sell one.
Can I contribute some of the sale of the rental house to my super? Would I do that before the CGT is calculated? Or, can I put some in my wife’s super or start a super account for her. She is 75.
Thanks. Jeff
Hi Jeff, I’d recommend a strategy consult to work through your options. When you are 67 to 74 years of age, you can still contribute personal contributions to superannuation without meeting the work test, but if you are going to claim a tax deduction on a portion of them, you will need to meet a work test definition of: being gainfully employed for 40 hours or more in any 30-day period in a financial year.
As I understand it, contributions to Super can’t be made to an existing pension fund and must go into an accumulatiin fund-is this true?
Hi Robert, Yes it’s true. You can’t make further contributions to an existing pension account. If you want to make additional contributions you would need to move your pension back to super, make the contributions and then move it across into a new pension account. You might need to set up a new super account to do so.
Most super and pension account providers will have the forms and processes in place to make this fairly easy for you to do.
Adding new contributions to super then combining your existing pension to a new pension will impact the minimum amount you will need to draw down, as well as the mix of taxable and tax free components in the pension.
Of course, as an adviser I’d always recommend that you review your situation first before making this change to consider the best decision for you. We can help you in one of our strategy consults.
Good morning. My wife and I are both 63. I have stopped working since September this year. My wife still works one day per week at Qld Health. We own our house mortgage-free. Our combined super is 500k. We have an investment property worth 800k with no mortgage on it. We are moving towards retirement and using our super to supplement our income once we stop working altogether in 2025. We are encouraged to use the income stream process upon retirement. Can you please advise if we can do something different?
Hi Joseph, we can definitely go over the pros and cons of each of your options with you. To do this you need to book a consultation with us HERE.
hi i plan to retire as i just turned 67and have long service leave can i cash it in and put it in my super
Good Morning, I am 75 years old and my partner has moved in with me and is purchasing half of my unit which I have had for 12 years. Would this qualify under the downsizing contribution and be able to be added to my super account?
Hi
What if you are 66yrs – my superannuation is now a pension TRIS – there is not a lot of money in this due to our circumstances but I have some money coming to me – how can I put this money into the TRIS or do I need to withdraw all and start a new one?? I have gone back to work 12hrs a week but there is nothing much in this account other then SCG but would like to stop working at 67- I will not be able to get the aged pension as my husband works full time and has years until retirement.