Greying, Working & Contributing

The ageing of the population – as outlined in the latest intergenerational report – together with a growing trend to work past traditional retirement ages inevitably means more of us will want to contribute to super for longer.

Perhaps you are among the many choosing to extend their working lives into older ages by winding-down their working hours as employees or becoming owner/operators of small businesses.

Certainly, numerous people decide to keep working into their sixties and beyond for the satisfaction that work may give them. Then, of course, there are the financial benefits.

More years in the workforce provides an opportunity to save more for what will be a shorter and therefore less costly retirement. And obviously, there will be more money to meet day-to-day living expenses.

Australia’s changing demographics means more people will need to understand the rules about contributing to super beyond 65 and about whether their personal super contributions are deductible.

As simply explained in the Australian Superannuation Handbook, published by Thomson Reuters, a super fund can accept:

Compulsory contributions from an employer regardless of an employee’s age.
Personal and salary-sacrificed contributions from members up to 74 years of age. (Beyond 65 years, members must have paid work for at least 40 hours over 30 consecutive days during a financial year. This is known as the "work test".)

A key question for someone who is winding-down their working life by operating a small business in their own name is whether their personal contributions are deductible.

Superannuation commentator Trish Power has written a valuable article – Who can make tax-deductible contributions? – in the latest issue of online investment newsletter Cuffelinks. (Power publishes the SuperGuide online newsletter.)

As Power explains, a person can usually claim a deduction for personal contributions up to the concessional contributions cap if they are self-employed or an employee who earns less than 10 per cent of their assessable income (salary-sacrificed super and reportable fringe benefits) as an employee.

A plan to extend your working life can be made more attractive if your super contributions are deductible.

Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia.

As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment.

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