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Relaxed super rules for over 60s

June 15th, 2022

New rules sign made of wood on a desk in a room with a blue background

On 1 July 2022, some superannuation rules will be tweaked and changed. But there’s no cause for alarm. These rules make contributing to super when you’re a bit older easier than ever. And give you flexibility for withdrawing from super too.

EXTENDED – reduced withdrawal amounts for pension

Each year, pension members are required to withdraw a percentage of their super based on their age and account balance.

In 2020, these withdrawal amounts were reduced by 50% in response to the COVID-19 crisis, allowing members to keep more of their super invested.

Although this was meant to be a temporary measure, the reduced withdrawal limits have now been extended into a third year. You can see what they are below.

Age (Reduced) rate for 2022/23 Default rate
Under 65 2% 4%
65–74 2.5% 5%
75–79 3% 6%
80–84 3.5% 7%
85–89 4.5% 9%
90–94 5.5% 11%
95 and over 7% 14%

Example: If you’re 65 and you have $100,000 in your pension account at 1 July 2022, you’ll need to withdraw at least 2.5% – or $2,500 – during the financial year.

REMOVED – ‘work test’ requirements

Currently, if you are aged between 65 and 74 and you want to make extra payments to your super after tax or by salary sacrifice, you have to meet the work test or work test exemption.

This test proves you’re eligible to contribute because you’ve worked at least 40 hours in 30 consecutive days in the financial year. (Or, in the case of the exemption, it proves that you worked these hours the year before.)

From 1 July, the work test rules are mostly being removed. This means older Australians can now top up their super without extra paperwork or the need to be employed for a certain number of hours or days.

There is one exception. If you make a contribution to your super and plan to claim a tax deduction for it, you will still have to prove your eligibility under the work test rules.

LOWERED – age limit for ‘downsizer contributions’

up to $300,000 of the proceeds into super. This is called a ‘downsizer contribution’.

Currently, you must be at least 65 years old to contribute to super this way. But from 1 July the age limit will be lowered to 60.

Downsizer contributions can significantly grow your super, but you should know all the rules and restrictions before proceeding. Here are just a few things to consider:

  • You must meet eligibility conditions set by the ATO. This includes owning the home for at least 10 years and making your contribution within 90 days of the sale.
  • Your spouse can make a downsizer contribution from the same sale, even if their name isn’t on the title.
  • Your contribution isn’t limited by the $110,000 non-concessional contribution cap, and it doesn’t matter if you’ve stopped working. However, it will be considered as part of your ‘total super balance’. Talk to us if you have questions about what this means.
  • Your family home is excluded from the assets test, so downsizing and contributing more to super could reduce your eligibility for the Age Pension.

For full details visit the ATO website.

INCREASED – eligibility for the ‘bring-forward rule’

Each year, there are ‘caps’ on how much super can be contributed to your account before tax and after tax. The after-tax cap (or limit) is $110,000. But if you use the bring-forward rule, this cap suddenly becomes a little more flexible…

This is because the bring-forward rule lets you use up to 3 years’ worth of future after-tax contributions over a shorter time period. Why would you do this? For some members, it means they can boost their super quickly before retirement, and for others it’s a way to contribute money they might have received from a windfall or inheritance.

Until now, you could only use the bring-forward rule if you were age 65 or under. But from 1 July, you’ll be able to use this rule up until the age of 75.

Need help?

Call us on 1800 360 998 for help with your superannuation account. And if you need advice about your retirement strategy, why not explore our financial advice services?