May 03, 2022 / News

New Contribution Rules

Important changes to the rules around superannuation contributions come into effect from 1 July 2022. From that date it will no longer be necessary to meet the work test in order to make salary sacrifice and non-concessional contributions.

We have summarised the rules which apply before and after 1 July 2022.

Compulsory employer contributions

(generally super guarantee contributions or compulsory contributions under an award).
These are tested against the member’s concessional contributions cap, and there are no age restrictions and no requirement to meet the work test.

Salary sacrifice contributions

(where you ask you employer to pay some of what would have been your pre-tax salary into a super fund instead).
These are tested against the member’s concessional contributions cap and cannot be made after the 28th day of the month following the month in which the member turns 75.

Before 1 July 2022:
If the member is aged 67 or over when the contribution is made they must meet the work test during the year or be entitled to the one-off exemption from the work test.

From 1 July 2022:
There is no requirement to meet the work test.

Personal deductible contributions

These are tested against the member’s concessional contributions cap, and cannot be made after the 28th day of the month following the month in which the member turns 75. A member under 18 can only make personal deductible contributions if they earned income as an employee or in running a business during the year.

Before 1 July 2022:
If the member is aged 67 or over when the contribution is made they must meet the work test during the year or be entitled to the one-off exemption from the work test.

From 1 July 2022:
If the member is aged 67 or over when the contribution is made the super fund can accept the contribution, but the member must meet the work test during the year in which the contribution is made or be entitled to the one-off exemption from the work test if they wish to claim a personal tax deduction for the contribution.

Non-concessional contributions

(not deductible to you and not taxable in the super fund)
These are tested against the member’s total superannuation balance and also the concessional contributions cap, and cannot be made after the 28th day of the month following the month in which the member turns 75.

Before 1 July 2022:
If the member is aged 67 or over when the contribution is made they must meet the work test during the year or be entitled to the one-off exemption from the work test.

From 1 July 2022:
There is no requirement to meet the work test. 

Also, the work test will not apply where the member is aged between 67 and 75 to:

Small business CGT concession contributions
Contributions in respect of payments that relate to structured settlements or orders for personal injuries, or
COVID-19 recontributions.

What is the work test?

In order to meet the work test, the member must have been gainfully employed (work and be paid) for at least 40 hours in any period of 30 consecutive days at any time in the year in which the contribution is made. A member will be entitled to the one-off exemption from the work test if they met the work test in the previous year and their total superannuation balance at 30 June of the previous year was less than $300,000 and they have not previously used the one-off exemption from the work test.

It is also important to keep in mind the concessional and non-concessional contribution caps and your total superannuation balance.

If the total of concessional contributions made you or on your behalf during the year exceeds your concessional contributions cap ($27,500 in 2021/22) plus any unused concessional contribution cap amounts from earlier financial years which you are eligible to use, the excess will be added to your personal taxable income and taxed at your personal marginal tax rate. You will be given the opportunity to release from your super fund an amount equal to up to 85% of the excess, and any difference between the amount withdrawn and the extra tax will be refunded to you. If you choose to release less than 85% of the excess from your super fund, some or all of your excess concessional contributions will also be treated as non-concessional contributions and counted against your non-concessional contributions cap. 

This can be a significant issue, as there are circumstances in which you may have a non-concessional contributions cap of nil.

From 1 July 2021 the general non-concessional cap has been $110,000. However, your personal non-concessional cap may be different. For example:

If you trigger a non-concessional cap bring forward, your cap for the current year may be up to $330,000, or
If your total superannuation balance at the previous 30 June was equal to or greater than the current year general transfer balance cap ($1.7m in 2021/22), your cap is nil.

If you breach you non-concessional contributions cap, you will be given the opportunity to release the excess from your super fund. If you do not elect to release the excess from your super fund, you will be charged excess non-concessional contributions tax at the rate of 47%.

The rules which apply to contributions and contributions caps are complex and this is of necessity only a general summary. We recommend that you contact your Nexia Edwards Marshall advisor if you have specific questions in this area.

The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.