Older Australians are to be granted more freedom around making concessional contributions, as the work test faces reform in Tuesday’s budget.
The so-called work test, which requires Australians to effectively work a minimum of 40 hours per month to make a voluntary super contribution, will be dropped for those aged 65 and 66, treasurer Josh Frydenberg has announced.
“This means that Australians aged 65 or 66 years who don’t meet the work test, because they may only work one day a week or volunteer, will now be able to make voluntary contributions to their superannuation,” Frydenberg said.
“There are around 55,000 Australians aged 65 and 66 who will benefit from this reform in 2020-21.”
It’s not the only change that will benefit Australians approaching retirement.
The government will also lift the age that Australians are allowed to make spouse contributions from 69 to 74.
“We will also extend access to the bring-forward arrangements, which currently allow those aged less than 65 years to make three years’ worth of non-concessional contributions, which are capped at $100,000 a year, to their super in a single year,” Frydenberg added.
“This will now be extended to those aged 65 and 66.”
Those changes are in response to changing retirement trends, with most Australians making a longer transition into retirement, according to Association of Superannuation Funds of Australian CEO Martin Fahy.
“What this is saying is that we need a pluralistic view on how we transition to retirement in terms of the work test, how long people can make contributions and how long they might be able to make additional catch-up contributions,” he explained.
Watch the full interview with Martin Fahy above.