What are the superannuation rules for individuals aged over 65?
This covers accessing superannuation rules for people over aged 65, as well as contribution rules for people aged over 65.
Age 65 is a significant age in relation to superannuation both in terms of accessing superannuation benefits and contributing to superannuation.
In fact, no other age is impacted as much as 65 years of age when taking into account changes in both the contribution and draw down rules.
It is important to abide by the superannuation rules, as penalties for breaching the rules can be detrimental to your retirement savings and impact your ability to achieve your retirement objectives.
Another thing that needs to be considered is the tax implications of contributing and withdrawing superannuation benefits.
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Within this article we will discuss taxation of contributions and withdrawals from super and when you can access your super tax free.
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Superannuation Contribution Rules for Over 65
Contribution rules for individuals 65 years and over are different depending on the type of contribution being made and the specific age that the contribution is being made (or received).
The main types of contributions are Mandatory Employer Superannuation Guarantee (SG) Contributions, Salary Sacrifice contributions, Personal Concessional (deductible) contributions and Non-Concessional (after-tax) contributions.
The table below details the superannuation contribution rules for individuals aged 65 years and over.
| Contribution Type | Under 65 | 65-69 | 70-74 | 75+ |
|---|---|---|---|---|
| Mandated SG or Award | No Restriction | No Restriction | No Restriction | No Restriction |
| Salary Sacrifice / Self Employed | No Restriction | Must Meet Work Test | Must Meet Work Test | Cannot Be Accepted |
| Personal After-Tax Contributions | No Restriction | Must Meet Work Test | Must Meet Work Test | Cannot Be Accepted |
| Spouse Contributions | No Restriction | Receiving Spouse Must Meet Work Test | Cannot Be Accepted | Cannot Be Accepted |
| Home Downsizer Contribution | No | Yes | Yes | Yes |
Superannuation Work Test Over Age 65
An individual over 65 years of age who would like to make contributions to superannuation will need to meet the superannuation work test.
The superannuation work test requires a person to work at least 40 hours over a 30-consecutive day period in the financial year that the contribution is made.
Further, this 40 hours needs to have been worked prior to the contribution being made.
However, indiviiduals aged between 65-74 and a super balance under $300,000 can make contributions to super without meeting the work test for the first 12 months after the end of financial year in which they last met the work test.
Limit on Non-Concessional Contributions
A person is only able to make Non-Concessional (after-tax) superannuation contributions from 1 July 2017 if their combined superannuation balance (including pension accounts) does not exceed $1.6 Million (indexed).
This is referred to as a total superannuation balance.
Individuals aged 65 and over are unable to trigger the Non-Concessional Contribution Bring Forward Rule. Click here to read more about the Bring Forward Rule, including the superannuation changes from 1 July 2017.
Superannuation Contribution Limits
Click here to find out the Concessional Contribution Cap limits.
Click here to find out the Non-Concessional Contribution Cap limits.
Exceeding the contribution caps can result in excess contributions tax.
Read more here for the difference between Concessional and Non-Concessional contributions.
Accessing Superannuation Rules for Over 65
The superannuation accessibility retirement rules for people over age 65 are quite simple.
A person over 65 years of age has unlimited access to their superannuation.
This is because attaining age 65 is a superannuation condition of release.
A person, therefore, has unlimited access to their savings as a lump sum withdrawal or pension income payments (subject to the Transfer Balance Cap – read here for more information on the Transfer Balance Cap).
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Read this article to see how you can access your super at 60 and continue to still work.
Tax on Super Contributions For Over Age 65
All Non-Concessional (after-tax) superannuation contributions are not taxed upon entry into a superannuation fund.
All Concessional (pre-tax) superannuation contributions incur Contributions Tax of 15% upon entry to superannuation.
An additional 15% Division 293 Tax is imposed on Concessional Contributions received or made by high income earners. Read this article for more information on the Division 293 Tax.
Tax on Superannuation Withdrawals for Over Age 65
All lump sum withdrawals made from superannuation by individuals aged 65 years or over are taxed differently depending on the tax components that make up the superannuation balance.
READ ‘Can I Withdraw My Super at 65 an Keep Working?‘
There are 3 types of tax components:
1. Tax-Free (Exempt) Component
2. Taxable (taxed) Component
3. Taxable (untaxed) Component
The superannuation provider of an individual will have information on the tax components of a superannuation balance.
The Tax-Free component of a lump sum withdrawal is received completely tax free and not assessed for tax purposes.
The Taxable (taxed) Component of a superannuation benefit is taxed as follows when withdrawn as a lump sum payment:
| Age | Taxable (taxed) Component of Withdrawal | Tax Rate (max) |
|---|---|---|
| 60 and over | Total Amount | 0% |
The Taxable (untaxed) Component of a superannuation benefit is taxed as follows when withdrawn as a lump sum payment:
| Age | Taxable (untaxed) Component of Withdrawal | Tax Rate (max) |
|---|---|---|
| 60 and over | First $1.415M (lifetime amount – indexed) | 15% |
| 60 and over | Balance over $1.415M | 45% |
The Taxable (taxed) Component of a superannuation benefit is taxed as follows when withdrawn as a pension income stream payment:
| Age | Taxable (taxed) Component of Withdrawal | Tax Rate (max) |
|---|---|---|
| 60 and over | Total Amount | Not Subject to Tax |
The Taxable (untaxed) Component of a superannuation benefit is taxed as follows when withdrawn as a pension income stream payment:
| Age | Taxable (untaxed) Component of Withdrawal | Tax Rate (max) |
|---|---|---|
| 60 and over | Total Amount | MTR – minus a 10% tax offset |
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