Know your options around making contributions, accessing your super savings and when Age Pension entitlements could be affected.

Whether you’re still working, or you’ve already retired, rules around super contributions, accessing super and things like age pension eligibility do ramp up once you hit your 60s and 70s.

There have also been a lot of rule changes in the super space, including some around age limits in recent times, so here’s a quick snapshot of what you need to know.

What super contributions can I make?

You can generally make two types of contributions, depending on your circumstances and whether or not you’re still working. They include concessional contributions and non-concessional contributions.

Concessional contributions include:

• Compulsory SG contributions, which are the before-tax contributions your employer is required to make into your super fund under the super guarantee, if you’re eligible.
• Voluntary salary sacrifice contributions, which are additional contributions you can get your employer to make into your super fund out of your before-tax income, if you choose to.
• Voluntary tax deductible contributions, which are contributions you can make (such as when you transfer funds from your bank account into your super) that you then claim a tax deduction for.

Note, concessional contributions are usually taxed at 15% in your super fund (or 30% if your total income exceeds $250,000), which for most people means you’ll generally pay less tax on contributions than you do on any income you may be earning.

Non-concessional contributions include:

• Voluntary personal contributions, which you can also make by transferring funds from your bank account into super, that you can’t claim a tax deduction for.

Note, some people may choose to make non-concessional contributions when they’ve reached their yearly concessional contributions cap, following an inheritance or sale of a large asset, or to receive a government contribution.

How much can I contribute and at what age?

If you’re making contributions to your super, there are limits on the amount of concessional and non-concessional contributions you can make each year.

Contribution type	Your age	Cap
Concessional	All	$27,500 a year Plus, unused cap amounts accrued since 1 July 2018 if you’re eligible*
Non-concessional	Under 75	$110,000 a year Alternatively, up to three years of annual caps ($330,000) under bring-forward rules if you’re eligible**

See below how much you can put in annually.

 * This broadly applies to people whose total super balance was less than $500,000 on 30 June of the previous financial year.

** If you happen to have total super assets over $1.7 million as at 30 June of the previous financial year, you can’t make additional non-concessional contributions to your super, or you may be penalised. There are restrictions on the ability to trigger bring forward rules for certain people with large total superannuation balances (more than $1.48 million as at 30 June of the previous financial year).

When does the work test apply?

If you’re aged 67 to 74 (at the time of the contribution) and want to claim a personal superannuation deduction for your contribution generally you must first satisfy work test requirements. Under the work test you must have worked at least 40 hours over 30 consecutive days in the financial year. Under the new rules, the work test can be met any time in the financial year the contribution was made. This is different to the previous rules, where the work test must be met before contributing.

What are the rules around downsizer contributions?

Eligible Australians aged 55 or over are able to make a tax-free non-concessional contribution to their super of up to $300,000 each using the proceeds from the sale of their main residence – regardless of caps and restrictions, such as the work test, that otherwise apply.

For couples, both spouses can take advantage of this opportunity, which means up to $600,000 per couple can be contributed toward super.

When can I access my super?

When you turn 65, you don’t have to retire or satisfy any special conditions to get full access to your super savings. While you can access super before this age, in most cases you must be retired, or if you keep working, you can access up to a certain percentage of your balance each year via a transition to retirement pension.

It’s also important to note, while you do have full access to your super, you’re not obligated to draw down your savings, however there may be some benefits in doing so, depending on your situation.

What options do I have to draw down my super? 

You’ll have to make a few decisions about what you would like to do with your super savings, which will generally be tax free after age 60. You might be wondering whether you’d be better off taking the money as a lump sum, income stream, or even a bit of both.

Lump sum 

Taking some or all of your super savings as a lump sum can be tempting, particularly if you want to pay off debt, assist children, or go on a holiday. However, it might not be the best option for everyone, as you’ll need to consider how you fund the years after you’ve finished working.

While you may be eligible for government entitlements, such as the age pension, it might not cover the type of lifestyle you’d like to have after you finish working.

Account-based pension

If you’d like to receive a regular income in retirement, an account-based pension (or allocated pension) could be a tax-effective option. You won’t be limited in what you can take out, but each year you’ll need to withdraw a minimum amount.

It’s also important to know that the most you’ll be able to transfer into this type of pension will be up to $1.7 million in super.

Remember, the value of an account-based pension is based on the amount of super you’ve saved, the investments you choose and the level of income you receive, so it won’t guarantee an income for life.

Annuity

Another option is an annuity product, which generally provides guaranteed payments over a set number of years, or the rest of your life, depending on whether you opt for a fixed-term or lifetime annuity.

They tend to be a more secure option as they provide a guaranteed income regardless of what might happen in financial markets. However, you will be sacrificing some flexibility as you can’t usually make lump sum withdrawals and your life expectancy may also be a consideration.

When might age pension entitlements be affected?

Currently, to be eligible for the age pension you must be 66 and a half, or older, and meet an income test and an assets test, which will determine the amount of money you’re eligible for.

As a result, how much money you have in super could affect your Age Pension entitlements. Contributing some of your super funds to a younger spouse may be one way to lessen the impact of the income and assets tests, but this will depend on your individual circumstances, so it’s important to do your research.

With changes underway, the qualifying age for the Age Pension is gradually increasing to 67 based on when you were born. To find out more about eligibility, check out the Services Australia website.

What else do I need to know?

• If you exceed super contribution caps, additional tax and penalties may apply.
• The value of your investment in super can go up and down. Before making extra contributions, make sure you understand, and are comfortable with, any potential risks.