Over the years, the work test rules have played an important role in determining if elder Australians can make certain voluntary superannuation contributions.
Although these rules have existed for many years, there has been some ambiguity with regards to certain work test arrangements being put in place and different views on whether they satisfy the work test criteria.
Mansi Desai, Technical Services Analyst at Challenger revisited the existing rules and have provided some answers to some frequently asked questions.
Meeting the work test
Superannuation regulations mandate that individuals aged 67 to 74 years must meet the work test or be eligible for the work test exemption, in order to make certain voluntary contributions to super.
Although these voluntary contributions cannot be made once the individual turns 75 years, the legislation allows a small grace period, where contributions can be accepted within 28 days after the end of the month in which the individual turns 75 years.
The work test requires an individual to be gainfully employed, for at least 40 hours within 30 consecutive days in the financial year in which the contribution is made.
The requirement to complete 40 hours over 30 days is fairly flexible. For example, an individual can complete the entire duration of 40 hours in one week or can complete the 40 hours over a few weeks by working part-time, as long as all 40 hours are completed within 30 consecutive days. It is important to note that it has to be gainful employment - meaning the individual is required to receive some sort of gain or reward for the work performed.
Work performed without gain or reward will not satisfy the work test.
If an individual contributes to super and fails to meet the work test in that financial year, the fund is required to return the money within 30 days of being notified of the breach.
Exception to the work test rules.
Some voluntary contributions like downsizer contributions (available to eligible individuals aged 65 years and over) can be made by those aged 67 years or over without meeting the work test or being eligible for work test exemption. Mandated contributions like Super Guarantee or contributions made under an industrial award or agreement are also not subject to the work test rules.
My client, aged 69, has continuously received the JobKeeper Payment for six months from 1 July 2020, however, he hasn’t physically attended work. Does he meet the work test?
In a recently published FAQ, APRA clarified their view that where an employer is receiving the JobKeeper Payment, the individual is considered to be gainfully employed for the purposes of meeting the work test, even if that individual has been fully stood down and is not actually performing work. APRA stated that there is no requirement for the trustees to distinguish between individual members on JobKeeper who are working reduced hours or those who have been stood down. It can be assumed that all members in receipt of the JobKeeper Payment satisfy the work test for the purpose of making voluntary super contributions. Note that individuals receiving the JobSeeker Payment do not meet the work test. These are payments from Centrelink that provide financial help for individuals looking for work.
My client is age 68 and volunteers on a part-time basis for at least 40 hours a fortnight. She doesn’t get paid for the work done. Does she meet the work test?
Volunteering or charity work without getting paid does not meet the work test. This is because any work performed without a gain or reward does not satisfy the definition of gainful employment. Similarly, jury duty does not meet the definition of gainful employment. A juror is not working incapacity of an employee and the amount paid to the juror is not in lieu of work performed.
The payment is an allowance or a reimbursement of the expenses.
If you have any questions about meeting the work test, please call us.