2.4 Work test

The work test requires a member to be gainfully employed in order to make non-concessional contributions (NCCs). From the 2022-23 financial year, the work test was abolished for members up to age 74 years. The work test still applies for personal deductible contributions made by people between the ages of 67 and 74.

To satisfy the work test* a member must work for at least 40 hours during a consecutive 30-day period in the financial year in which the contributions are made.

Table 1: Work test by financial year and age

Year	Age	Work test (and work test exemption conditions)
2022-23 onwards	To age 74	Work test no longer applies for members making NCCs from the 2022/23 financial year. This excludes personal deductible contributions made by people between 67-74. Those aged 67 to 74 will still have to meet the work test if they wish to claim a tax deduction for a personal contribution. These individuals will continue to lodge their notice of intent to claim or vary a personal super contribution deduction with their tax return.
Previous rules
2021-21	67 to 74 years old	A member needed to meet the work test or satisfy the work test exemption criteria
2020-21	Under 67 years old	Not applicable
2019-20	65 to 74 years old	A member needed to meet the work test or satisfy the work test exemption criteria
2019-20	Under 65 years old	Not applicable

*Definition - employed or self-employed for reward in any business, trade, profession, vocation, occupation or employment. The member is remunerated in return for the personal service provided either as salary, business income, bonuses and commissions that are documented and declared for tax purposes.

Note: this does not include passive investment income such as rental income or dividend income. Furthermore, members who volunteer their services are generally not considered to be gainfully employed as they do not receive remuneration for their services.

^The Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021 passed on 10 February 2022, which removed the work test for those ages 65 to 74, allowing them to make non-concessional contributions.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

2.5 Eligibility to make super contributions

Whether or not a superannuation contribution can be made depends on:

• the age of the member at the time of the contribution
• whether the member meets the work test (if required)
• tax file number
• the member's total superannuation balance.

Contribution type	Work test?	Age limit
Mandated employer contributions:
Super Guarantee (SG) contributions (concessional)	Work test does not apply	No age restriction
Contributions made under an industrial agreement or award
Payments from the ATO Superannuation Holding Accounts Special Account (SHASA)
Non-mandated contributions:
Salary sacrifice (concessional)	Work test does not apply	The maximum age is 75
Non-concessional contributions	Work test does not apply	The maximum age is 75
Personal deductible (concessional) - contributions that an individual can claim as a tax deduction, up to the concessional contributions cap.	The work test still applies for people between the ages 67 and 75	The maximum age is 75
Spouse contribution	The work test applies if the spouse who is receiving the contribution is age 74 or over at the time of contribution. The contributing spouse must meet the work test and be under age 75.	Spouse must be under age 75
Downsizer contribution	Work test does not apply.	There is no maximum age limit. Member must be age 55 years or older and meet other eligibility criteria.
Note: Contributions can be received 28 days after the end of the month in which the person turns 75.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

2.6 Employer contributions

Superannuation Guarantee

Australian law requires all employers to provide a minimum level of superannuation for their employees. For each quarter of a financial year, an amount equal to the prevailing Superannuation Guarantee (SG) rate of each eligible employee's ordinary time earnings (OTE) must be paid to a complying super fund. Employer contributions include all deductible employer super contributions made by an employer for the benefit of an employee and are taxed at 15%.

The SG payment rate is legislated to slowly increase to 12% by 1 July 2025.

Financial year	SG rate (%)
2022-2023	10.5
2023-2024	11
2024-2025	11.5
2025-26 and future years	12

Salary sacrifice

Salary sacrifice is an arrangement between an employer and an employee, where the employee agrees to forgo receiving part of their salary or wages and agrees instead to have this amount contributed to their superannuation fund. Superannuation contributions made under salary sacrifice arrangements are employer contributions and are taxed at the concessional rate of 15%.

Employer contributions are taxed at 15% when paid to a complying superannuation fund. An employer is allowed a tax deduction for contributions paid to a superannuation fund on behalf of employees, as long as a number of conditions are satisfied. The amount of the employer's tax deduction is generally not limited; however, the employee may be subject to a penalty if their contributions exceed the concessional contributions cap.

Note:  Prior to 2020, an employer could use salary sacrificed super contributions to reduce both the earnings amount on which the super guarantee entitlement is calculated, as well as satisfying part of their compulsory SG contributions for an employee. However, from 1 January 2020, this is no longer allowed. Salary sacrificed super contributions cannot:

• reduce the ordinary time earnings on which an employer is required to calculate an employee's super entitlement
• count towards the amount of super guarantee contributions that an employer is required to make

Employer Awards

An employer may be required to make employer contributions in accordance with an industrial agreement. Employer contributions made in accordance with an industrial agreement can count towards the employer's SG obligation provided they are made in the relevant quarter or represent a pre-payment of SG contributions made within 12 months prior to the quarter. Where contributions made under an industrial agreement are less than the employer's SG obligation for the quarter, the employer will need to make an employer contribution to cover any shortfall.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

2.7 Member contributions

Member contributions include any contribution made by or on behalf of the member (this does not include employer contributions i.e., Super Guarantee (SG) or salary sacrifice.

Whether the fund can accept a contribution from that member depends on:

• the member's age
• whether the member needs to meet the work test
• whether the member provides their tax file number.

Member contributions

Type of member contribution	Description
Child contributions	Contributions made for a member who is under 18 by someone other than the member or their employer.
Excess CGT contributions	Contributions exceeding your capital gains tax (CGT) cap amount
Excess concessional	Contributions in excess of the concessional contributions cap which have not been released from your superannuation fund
Government Co-contributions	Up to a maximum amount of $500
Member deductible contributions	Other personal contributions which you have not claimed as an income tax deduction
Non-concessional contributions	Personal contributions you make from your after-tax income (up to the non-concessional contributions cap).
Overseas transfers	Most transfers from foreign super funds (including New Zealand KiwiSaver contributions).
Re-contribution amounts	A benefit from a retirement account which you withdraw and then re-contribute to superannuation (this is a strategy that may be used to reduce the taxable component and increase the tax-free component of your super). You cannot have claimed a tax deduction for this type of contribution.
Spouse contributions	Contributions your spouse makes to your super fund
Exclusions - Contributions that do not count towards your non-concessional contributions cap:
CGT contributions	Contributions that a member elects to count towards the capital gains tax (CGT) cap lifetime limit
Downsizer contributions	Proceeds contributed to super from the sale of a primary residence
Personal injury	Personal injury payments, also called structured settlement contributions

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

2.8 Low-income super income tax offset (LISTO)

What is LISTO?

If you are on a low income (earning under $37,000), you pay no personal income tax on the first $18,200 you earn and then 19% tax on any income over $18,201 up to $45,000 (in 2023/24). However all compulsory Superannuation Guarantee (SG) contributions paid by your employer are taxed at 15%. LISTO allows you to recpooup this 15% superannuation tax.

The LISTO is 15% of the concessional (before tax) super contributions a member or their employer pays into the super fund. The maximum payment a member can receive in a financial year is $500.

Eligibility

You are eligible for the LISTO if you satisfy ALL  of the following requirements:

• you or your employer pay concessional (before tax) contributions for the year to a complying super fund - this includes super guarantee amounts
• you earn $37,000 or less a year - to work out your eligibility, we use your actual or estimated 'adjusted taxable income' (see Income tests)
• you have not held a temporary resident visa at any time during the income year (note that New Zealand citizens in Australia are eligible for the payment)
• you lodge a tax return and 10% or more of your total income comes from business and/or employment, or you don't lodge a tax return and 10% or more of your total income comes from your employment.

LISTO is calculated after a member lodges their tax return and is paid to their super fund. If a tax return is not lodged, the ATO will work out the entitlement based on the information it receives from the super fund and your employer.

Note: A low-income earner may also be eligible to receive super governemnet co-contributions if they make non-concessional superannuation contributions.

1 July 2023.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

2.9 Government Co-contribution

To receive the Government co-contribution to superannuation, a member's total income* must be less than the higher income threshold for the current financial year. The maximum co-contribution entitlement is $500.

Co-contribution income thresholds
Year	Maximum entitlement	Lower income threshold	Higher income threshold
2023-24	$500	$43,445	$58,445
2022-23	$500	$42,016	$57,016

Members with total income* less than the higher-income threshold in the relevant financial year, who make a personal non-concessional contribution to superannuation, may be eligible for a government co-contribution.

Calculation

Amount of co-contribution payable - 2023/24
Total income*	$0 to $43,445
Lesser of:	eligible contributions x 50%, and $500
Total income*	$43,445 to $58,445
Lesser of:	eligible contributions x 50%, and $500 reduced by $0.03333 for each dollar over the lower income threshold

Eligibility criteria

To be eligible to receive a government co-contribution, members must satisfy the following requirements for the relevant financial year:

• be less than 71 years old at the end of the financial year
• be eligible to contribute to superannuation and make a personal non-concessional (after-tax) contribution to a complying superannuation fund by 30 June
• satisfy the two income tests (income threshold and 10% eligible income tests)
• lodge a tax return for the relevant financial year
• not hold a temporary visa at any time during the financial year (unless they are a New Zealand citizen, or it was a prescribed visa)
• total superannuation balance is less than the transfer balance cap ($1.9 million from the 2023/24 financial year) at the end of 30 June of the previous financial year.
• not contributed more than their non-concessional contributions cap

10% eligible income test

To satisfy this test, 10% or more of a member's total income must come from:

• employment-related activities
• carrying on a business
• a combination of both

These amounts are referred to as 'eligible income' amounts.

To determine eligibility for the co-contribution under the 10% rule for a sole trader, total income is not reduced by business deductions.

Income that is related to employment or business is eligible income - for example:

• salary and wages
• business income earned as a sole trader or in a partnership
• director fees.

The following types of income are not eligible income for super co-contribution purposes:

• non-business partnership distributions
• distributions from a trust
• income from individually or jointly held assets, such as interest, rent and dividends
• income related to another year of employment, such as employment termination payment and lump sum payments.

Contributions not eligible for a co-contribution

• child contributions
• spouse contributions
• transfer from an overseas fund

*Total income

For the member to receive the co-contribution, their total income must be less than the higher income threshold for that financial year.

Total income is the sum of:

• assessable income
• reportable fringe benefits
• reportable super contributions reduced (but not below zero) by any excess concessional contributions, less
• members assessable first home super saver released amount, and allowable business deductions

Assessable income - is the income that is included in the member's tax return. Assessable income is not reduced by tax deductions (taxable income is after-tax deductions).

Reportable fringe benefits - Certain fringe benefits (non-cash benefits) paid by an employer are required to be reported in the employee's tax return. These are known as reportable fringe benefits.

Reportable employer superannuation contributions - reportable employer superannuation contributions are contributions made to a superannuation fund by an employer for an individual. An example is a contribution made on your behalf under a salary sacrifice arrangement.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

2.10 Salary sacrifice contributions

Salary sacrifice arrangement is an arrangement under which an employee agrees to forego part of their total remuneration that they would otherwise expect to receive as salary or wages.

The sacrificed salary or wages do not form part of the employee's assessable income. Any superannuation contributions made under an effective salary sacrifice arrangement will constitute concessional contributions of the employee and will be included in their concessional contribution cap for the year.

Salary sacrifice example - 2023/24

Andy, aged 50, earns $150,000 p.a. excluding superannuation. He enters into a salary sacrifice arrangement with his employer to sacrifice $11,000 p.a. into superannuation. As his employer is required to pay SG of $16,500 (11% of his gross salary), by salary sacrificing this additional amount, Andy will be contributing concessional contributions up to the maximum cap of $27,500.

Concessional Contribution Cap	27,500
Salary excluding super	150,000
Super guarantee (SG) 11%	16,500
	Before salary sacrifice arrangement	After salary sacrifice arrangement
Salary	150,000	150,000
Salary sacrifice	-	11,000
Employer SG contribution (11%)	16,500	16,500
Total super contribution	16,500	27,500
Reduced salary	150,000	139,000
Tax on taxable income	40,567	36,497
Medicare levy	3,000	2,780
Total tax	43,567	39,277
Net income after tax	106,433	99,723

Outcome:

Andy will salary sacrifice $11,000 however due to the drop in his taxable income, his take-home salary has only reduced by $6,710.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

2.11 First home super saver scheme

The First Home Super Saver (FHSS) Scheme allows members to save for their first home within the concessionally taxed superannuation environment.

Maximum contribution amount per year

An individual can contribute a maximum of $15,000 per year to their superannuation fund, under the FHSS Scheme. This can be made up of voluntary concessional or non-concessional contributions.

Withdrawal limit

The maximum amount that can be withdrawn from the FHSS Scheme is currently $50,000 per person (from 1 July 2022). The FHSS release amount is the sum of eligible contributions and associated earnings, and includes:

• 100% of eligible non-concessional contributions
• 85% of eligible concessional contributions, and
• deemed associated earnings**

Contribution caps still apply

Super contributions made under the FHSS Scheme must fall within the annual limits of the general concessional contribution cap and/ or the non-concessional contribution cap.Contributions counted towards the FHSS scheme must be voluntary contributions, but can be either:

Concessional contributions (on which 15% tax is levied)

• Salary sacrifice
• Member deductible, or

Non-concessional contributions:

• After-tax personal contributions

Note:

Compulsory Superannuation Guarantee (SG) contributions paid by an employer do not count towards FHSS savings. Spouse contributions are also ineligible.

Eligibility for the FHSS Scheme

To be eligible an individual must:

• be 18 years of age or over to apply for the release of super contributions under the FHSS Scheme
• have not previously owned a property in Australia (including investment property, vacant land, or commercial property)
• have not previously requested the ATO to issue an FHSS release authority
• intend to live in the property purchased as soon as practicable after buying, and must live in the property for at least six of the first 12 months
• purchase a property in Australia

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

2.12 Downsizer contributions

Key points

• Members aged 55 years and over can make superannuation contributions of up to $300,000 from the proceeds of selling their home
• The downsizer contributions are not included as non-concessional contributions and will not affect any contribution caps
• The downsizer contributions can still be made even if an individual's total super balance is greater than $1.9 million*
• The sale of any dwelling in Australia (other than a caravan, houseboat or mobile home) can qualify the member to make a contribution, as long as they have owned the dwelling for at least 10 years
• Both members of a couple will be entitled to take advantage of downsizer contributions.

Requirements

Requirements to make the downsizer contribution are:
the contract for sale must be entered into on or after 1 July 2018
the contribution must be made from the capital proceeds of disposal of a property located in Australia
the member or their spouse must have owned the property for 10 years or more
the member or their spouse must be eligible for a main residence CGT exemption (full or partial)
the member must be aged 55 or over at the time the contribution is made*
the maximum contribution amount is $300,000 per member
the contribution must be made within 90 days of the change of ownership; generally the date of settlement. An extension can be applied for in some limited circumstances.
the ATO election form must be used to have the contribution treated as a downsizer contribution at the time the contribution is made (cannot apply to contributions retrospectively)

*The total super balanced was indexed by $200,00 to $1.9 million on 1 July 2023, up from $1.7million.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.

2.13 Inactive accounts

The Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019 introduced a new category of accounts that need to be reported and paid to the ATO, these are inactive low-balance accounts.

To protect accounts from fee erosion, inactive low-balance super accounts are transferred to the ATO and, where possible, the ATO will proactively consolidate a member's super on their behalf.

This initiative will cap fees and prevent unnecessary insurance premiums from eroding the account balances of super fund members who have 'inactive' low-balance superannuation accounts.

The core provisions are:

• administration and investment fees are capped at 3% for account balances under $6,000
• exit fees are banned
• inactive low-balance accounts will be transferred to the ATO for consolidation with any active accounts where possible.

Inactive accounts are those where:

• the accounts balance is less than $6,000, and
  • the member has either, not made a contribution in the past 16 months, or,
  • has not opted-in for their fund's insurance offer

Fee caps

Capping fees at 3% may seem unnecessary as very few super funds charge percentage fees anywhere near that high. However, the fee cap was introduced to protect young people and low-income earners who are disproportionately impacted by, say, high membership fees. For example, if a member pays $100 in member fees on a $1.000 account balance, this converts to a 10% fee- more than triple the cap.

The new law comes into play if the account balance is less than $6,000, but only members with less than $3,000 in their account are likely to be impacted. If a member does pay more than 3% in fees, their super fund will refund this money to the member at the end of each financial year.

Reducing insurance premiums on inactive accounts

In response to concerns that there are thousands of fund members with inactive superannuation accounts who are still paying compulsory insurance premiums, the new law requires funds to identify low-balance inactive accounts and transfer them to the Australian Taxation Office.

Tip: An inactive super fund member might receive a letter from their super fund asking if they want to continue being insured. If the member does not respond, their fund most likely will switch off their insurance. If the member wants to the insurance to recommence they will need to contact the fund immediately.

This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.