Reaching 65 is a reason to celebrate. And what better way to reward yourself than by making your super work harder for you?

If you’ve just turned 65, chances are you’ve given some thought to how to get the most from your retirement savings. If you’re still working you may still be able to add to your super for up to 10 more years. But to make sure you can best maximise your savings, it’s important to understand the rules.

Can I still make super contributions after 65?

You can continue to add to your super after turning 65 as long as you meet the work test for that financial year. The work test requires that you undertake paid work for at least 40 hours within 30 consecutive days during the financial year. Importantly, you need to meet this test before contributions can be made to your super fund.

This means you can continue to build your retirement savings, even if you drop back to part time work. And the longer you keep contributing, the longer you can take advantage of super’s tax advantaged status and build more wealth to take you through your retirement years.

Remember, after turning 75, you can generally no longer contribute to your super. So it’s important to consider making larger contributions – such as the proceeds from the sale of a house or other assets – while you still can.

How much can I contribute?

In general, everyone is subject to the same contribution caps: $25,000 a year for concessional contributions, such as super guarantee payments and salary sacrifice contributions; and $150,000 a year for non-concessional contributions made from your after-tax income. But if you are under 65 at the start of the financial year, you may be able to contribute significantly more because of the bring-forward rule.

The bring-forward rule essentially lets you make non-concessional contributions of up to a total of $450,000 any time in a three-year period, by using your current-year non-concessional contributions cap as well as bringing forward the next two years’ worth of non-concessional contributions caps.

However, if you turn 65 during your three year period under the bring-forward rule, then any contributions you make in a financial year where you’re already aged 65 at the start of that financial yearmust be made in individual transactions of no more than $150,000. To avoid any doubt, it can be a good idea to make these contributions on different days, and clearly identify them as separate payments on all transaction paperwork.

Case study: Making super contributions after the age of 65

Gloria turns 65 in February 2013 and will continue to meet the work test for several years. She has $200,000 available to contribute to super, and when she turns 66 she plans to sell a property worth $250,000.

Can Gloria contribute to super in 2012-13?
Yes. While Gloria is already aged 65, she has met the work test for the 2012-13 financial year before making the contribution. Since she is under 75 she is still eligible to contribute.

How much can she contribute in 2012-13?
Gloria can contribute the full $200,000 because she was aged 64 on 1 July 2012. This means that by planning to contribute more than $150,000 she triggers the bring-forward rule, and the maximum amount she can contribute in 2012-13 is $450,000.

Can Gloria contribute to super in 2013-14?
Yes. In 2013-14 Gloria will once again be over 65 but under 75. She can still contribute to super, as long as she meets the work test requirement before making the contribution.

How much can she contribute in 2013-14?
By contributing over $150,000 in 2012-13, Gloria has triggered the bring-forward rule. After her previous contribution of $200,000 she can now contribute up to $250,000 and still be within the maximum limit of $450,000. However, she must make these contributions as two separate transactions – for example, of $150,000 and $100,000.

Talk to an adviser

As you can see, the rules are complex, and everyone’s situation is different. So it’s essential to seek professional advice before you act.

¹ Contributions can be made up to 28 days after the end of the month when you turn 75.

* article courtesy of Colonial First State (20th July 2012)

Disclaimer

This document has been prepared by Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) based on its understanding of current regulatory requirements and laws as at 20 July 2012 . This document is not advice and provides information only. It does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement available from the product issuer carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision.

Copyright © 2012 Colonial First State Group Limited.