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’s just turned 76 and came into some money unexpectedly, through a lottery win. He’s decided he doesn’t have anything to spend this $45,000 on and so wanted to put it into his super. The rules say you can’t contribute to a decumulation account such as an account based pension, so that was never going to work. But he also still has an accumulation account and he wanted to invest his winnings there. A friend at Albert’s service club told him that once you turn 75 you can no longer make any contributions. Hence his email seeking clarification.
The good news is that Albert’s friend’s summary is not entirely correct. Over-75-year-olds can continue to put money into super accumulation accounts.
The bad news is that there are only two specific ways of doing this.
Let’s take time to have a refresh on the rules on contributions.
Putting money into super
During your working life and into retirement, there are many ways you are encouraged to invest money in your super. Some ways are voluntary ((concessional and non-concessional)), others are not.
The mandatory contributions are made by your employer through the Super Guarantee, which currently sits at 11% of your salary, regardless of how much you earn.
According to the Australian Taxation Office (ATO) there are 11 different types of voluntary contributions. Voluntary contributions don’t include any mandatory contributions made by your employer.
Here is the ATO list of voluntary contributions:
- salary sacrifice contributions
- personal contributions – If you are aged 67-74 you need to meet a work test or hold a work test exemption to claim a tax deduction for these contributions.
- spouse contributions
- contributions by parents, other family or friends (not in the capacity of an employer)
- contributions by an insurer
- contributions by employers above their SG or award obligations
- government co-contributions
- downsizer contributions
- super capital gains tax cap election amounts
- personal injury election amounts
- first home super saver scheme contributions
In summary, the only contribution above that can be made into the super account of someone over 75 is by an employer through the super guarantee. There is some leeway regarding contributions in the 28 days after you turn 75! This includes:
- salary sacrifice
- some other amounts paid by your employer
- personal or spouse contributions. … OR …
The exception to the rule …
The Downsizer Contribution has no age limit. If you are 75, 76 or older your fund can always accept downsizer contributions..
Sadly, the downsizer contribution and compulsory employer contributions cannot be used by Albert as he no longer works and has no plans to sell his home. But at least he is clear on the rules now. And in talking to one of the Retirement Essentials team he was able to explore whether using his lottery win to make his home more accessible might be a smart idea. The money he spends on the renovation won’t be assessable and therefore won’t impact his part-Age Pension.
Are you unsure of the rules that relate to your super contributions and income streams? Why not have a chat with one of our advisers to check the rules that are relevant to your situation? Decision-making can be so much easier when you know all the details.
Is capping most super contributions for those over 75 really fair?
Or could this be viewed as some form of ageism?
Most people age 75 or older do not work. Above you saying a lot about adding money to a super, but in reality as 75 yo dies not work – there is no way one can add money to super account. Your comment does not explained how to contribute. What if one is younger but do nit work?
And I do wish the people that write these articles weren’t paid by the word…
They are SO wordy.
Just give us the FACTS (if you know them..)
Thanks for the comment Jethro. There is always a balance between those that appreciate brevity – just the facts thanks – and those that like us to explain in more detail. Generally most readers seem to appreciate it when we go the extra mile but maybe sometimes we go a bit too far. Your feedback is appreciated
What Albert could do is use the $45,000 toward a Life Time Annuity from which he receives a monthly payment. If he does this Centrelink will only count 60% of the amount invested as an asset. This means that only $27,000 of the $45,000 would be classed as an asset.
There are several types of annuity available and Albert would need to make sure he has a Lifetime Annuity as distinct from a Fixed Term Annuity. This might also help preserve a full or part pension in the case of an inheritance as all or part of the inheritance can be rolled into to a LIfe Annuity.
The above strategy works for me but I am not a Financial Advisor and it goes without saying that this strategy should be checked out with a qualified adviser.
Be better to put into a high interest account. I have just opened a Plus account with ANZ savings account 4.9% comes with an everyday account and few extra options to save I am doing this. I still work and 70yo
Hi, why ANZ ? Ubank pays 5.10% and no costs you only need to put $200 in a month, Macquarie Bank, pays 5.40% and you need to pay$1000 a month to receive the interest, both have free debit cards, and free overseas use, anyway your call.
Would spending inheritance cash to install a pool at my home qualify as a home improvement?
Hi Fiona, thanks for your question! Yes you could spend money on a new pool and/or other renovations to the home you live in. As the home you live in is exempt from assessment this is a legitimate strategy to reduce your assessable assets.
According to the ATO website, the work test only applies to people between 67-74 if they wish to have their personal contributions considered as concessional, and claim a tax deduction. If they don’t intend to claim a tax deduction they can make a non-concessional personal contribution without the need for a work test (or work test exemption).
Perhaps, your advice should be clarified?
Regards
Thanks for the comment Stephen. I have made that clear in the article. Regards
I agree with you Stephen it needs to be clarified
I believe that it is Ageism and I am very disappointed that I am not allowed to contribute to my small superanuation account because I am 79 and do not work.
I am on a part Aged pension and have a few shares that I would like to sell and contribute the proceeds.
It is ridiculous a 99yo cannot put an inheritance from a 107yo spinster sister into super –as the pay out system prevents him from loosing it in one hit-care for our elderly–Both these persons have been effectively locked out of super -yep that is ageism in my book