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Caveat Emptor: Super caps for workers over 65

A question from one of our readers:

Everyone seems to talk about non concessional contributions (NCC) up to the age of 65 and the fact that the bring forward rule means that you are able from 1 July, 2014, to make a contribution of $540,000. What happens after the age of 65 when you are still working as a lot of people we know are? Can you still make a NCC contribution as well as the $35,000 concessional contribution (CC)?

Hope you can help as I have received several different answers from financial professionals.

Answer provided by Graeme Colley:

The short answers are that NCCs and CCs can be accepted by the fund between age 65 and 75 providing the work tests are met. There are some very limited exceptions to this rule that do not require the work tests to be met during that time where the contributions are made for purposes of the superannuation guarantee, under an industrial award or are contributions that relate to the first home owner’s scheme.

Let’s have a look at the rules for NCCs pre-65, straddling age 65 and for those older than age 65:

NCCs before reaching age 65:

Acceptance of contributions by the fund – there are no work tests on the fund accepting contributions prior to a person reaching age 65. The test of the person’s age is determined at the commencement of the financial year. (SIS Reg 7.01(1) and Reg 7.01(3)).

NCCs are governed by Subdivision 292-C of the Income Tax Assessment Act 1997 (ITAA 97) and defined in section 292-90. The general rule is that a person’s NCC for the relevant year is set out in section 292-85. For the 2013/14 financial year it is $150,000 and for the 2014/15 financial year it will be $180,000. There is an exception to the general rule in sub-sections 292-85(3) and 292-85(4) which permits a person who is under age 65 in a financial year where the aggregate NCC(s) of more than the standard cap have been made, a person will have an NCC cap for a fixed three year period equal to 3 times the NCC under the general rule. If a person has exceeded their NCC in the 2013/14 financial year the cap will be 3 x $150,000 = $450,000 and for the 2014/15 financial year it will be 3 x $180,000 = $540,000.

NCCs where a person reaches age 65 during the 3 year fixed period

If a person exceeds the general NCC cap in a year in which they are under 65 they will have access to the higher NCC cap for the fixed three year period. As an example, let’s assume Margaret is 64 in the 2014/15 financial year and contributes $190,000 to superannuation as a NCC. As the general NCC cap is $180,000, she has contributed more than her general NCC for that year and she will have the opportunity to contribute NCC’s equal to 3 times the general NCC over the 2014/15, 2015/16 and 2016/17 financial years. The higher NCC will be $540,000 over that period.

However, it needs to be understood that there are a number of conditions applying to the NCC made to the fund once a person reaches age 65 if the fund is to accept contributions in terms of Reg 7 of the SIS Regulations. That is, once a person reaches age 65 NCCs can only be accepted by the fund if the person has been employed on a ‘part-time’ basis at any time during the year of income. If a person turns age 65 in the year of income then part-time work that has been undertaken during the financial year prior to reaching age 65 is taken to meet the work test. (part-time employment is defined in SIS Reg 7.01 and the contribution rules are covered in SIS Reg 7.04).

Another condition relates to the amount of the NCC that can be accepted by the fund during a financial year in which the member was age 65 or older on 1 July in that year. SIS Reg 7.04(3) states that the amount of an NCC that can be accepted in relation to a person who is age 65 but less than 75 on 1 July in a financial year is limited to the NCC cap. This does not prevent the fund from accepting more than one contribution to the fund during the relevant financial years, however, it means that if the person makes an NCC in excess of the standard cap of $180,000 (2014/15 financial year) any excess is required to be refunded within 30 days of receipt as provided in sub-reg 7.04(4).

To illustrate the operation of these rules here are some examples, all relating to Brian, who turns  65 on 1 October 2014 and has a standard NCC of $180,000. Brian works only in July every year for at least 40 hours in 30 consecutive days and therefore will meet the work tests of SIS Reg 7 for contributions after reaching age 65.

Example 1 - In August 2014 Brian makes an NCC of $200,000 which means he has access to the higher NCC cap for the 2014/15, 2015/16 and 2016/17 financial years. In November 2014 Brian makes an NCC of $340,000.

Example 2 - In August 2014 Brian makes an NCC of $300,000 which means he has access to the higher NCC cap for the 2014/15, 2015/16 and 2016/17 financial years. In November 2016 Brian makes an NCC of $140,000 and in January he makes an NCC of $100,000. As each of the two amounts Brian has made during the 2016/17 financial year are less than the NCC cap for the year they may be accepted by the fund.

Example 3 - In August 2014 Brian makes an NCC of $190,000 which means he has access to the higher NCC cap for the 2014/15, 2015/16 and 2016/17 financial years. In July 2015 Brian makes an NCC of $200,000. The fund is required to refund the excess of $20,000 to Brian as it is in excess of the NCC cap for that year as defined in subsection 292-85(2) of the ITAA 97, even though Brian’s personal NCC cap for that year is $540,000 less the NCCs made in the 2014/15 financial year.

Example 4 - In August 2014 Brian makes an NCC of $180,000 which means he has not yet triggered access to the higher NCC cap. In November 2014 Brian makes another NCC of $10,000 which will trigger the higher NCC cap for the 2014/15, 2015/16 and 2016/17 financial years as Brian was younger than age 65 on 1 July 2014.

Note: As Brian was under age 65 on 1 July 2104 the fund can accept contributions in one amount providing they are not greater than the higher NCC cap of $540,000 (refer to SIS Reg 7.04(3). This ignores any implications that may arise with the potential payment of excess NCC tax and the refund provisions. However, in the year in which Brian is age 65 or older on 1 July in that financial year the fund is only able to accept NCCs in one amount that are within the standard NCC cap of $180,000 (2014/15 financial year and later at this stage). This also ignores any implications that may arise with the potential payment of excess NCC tax and the refund provisions.

NCCs for a member who is between 65 and 75

Assuming a fund member has not triggered the higher NCC in the three financial years starting from the year in which they reach age 65, any NCCs that can be accepted by the fund in one amount will be limited to the standard NCC cap for the relevant year.

This can be illustrated with Todd’s case. Todd was 65 as at 1 July 2014 and has made an NCC of $200,000. As the amount exceeds the standard NCC cap the fund is required to refund $20,000 as his NCC cap is $180,000. In September 2014 Todd makes an NCC of $150,000. As the NCC does not exceed the NCC cap the fund is under no obligation to refund any amount, despite the fact that the total of the NCCs made to the fund are greater than Todd’s NCC cap of $180,000. In view of this Todd will be subject to excess NCC tax of 46.5% as the total NCCs made for the financial year exceeded the NCC.

Concessional contributions after reaching age 65

In the financial year in which a person is 65, concessional contributions can be made to the fund until they reach age 65 without any work test being met. However, once they reach age 65 the work test is required to be met at some time during the financial year prior to the fund accepting the concessional contribution.

Exceptions to the general rules for accepting contributions

There are some limited exceptions to the general rules for accepting some concessional and non-concessional contributions. Concessional contributions, such as Superannuation Guarantee and contributions made under an industrial award and amounts transferred from the First Home Savers arrangements can be accepted by the fund without the need to meet the work test at any time. Spouse contributions that are made to the fund can only be made if the member’s spouse meets the work tests between age 65 and age 70. However, NCCs can only be accepted once a person reaches age 65 if they meet the work test.


Graeme Colley is Director Technical and Professional Standards, SMSF Professionals’ Association of Australia Limited (SPAA)


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