When is a client eligible to make contributions?
The eligibility rules can vary depending on a client’s age and the source of contributions.
For a client under age 65, there are generally no restrictions on making contributions to super, aside from contribution caps and a requirement for the client to quote his or her tax file number to the super fund. Once a client turns 65, he or she will also need to consider the work test.
Age and work test
If it applies, the work test requires that a member must have been gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in the financial year in which the contribution is made. The work test must be met before a fund can accept a contribution. The table below outlines the age and work test rules based on the source of the contribution and, in the case of employer contributions, whether they are mandated or non-mandated.
|Client’s age (when contribution is made)
|Member’s employer||Member (personal)||Spouse or other person|
|Under 65||No work test||No work test||No work test|
|65-69||Mandated: no work test
Non-mandated: work test
|Work test||Work test|
|70-74||Mandated: no work test
Non-mandated: work test
|Work test||Not eligible|
|75 or above||Mandated: no work test
Non-mandated: not eligible
|Not eligible||Not eligible|
Note: employer and personal contributions may be accepted up to 28 days after the end of the month in which the member reaches age 75, provided the work test has been met in the financial year in which the contribution is made.
What are mandated employer contributions?
Mandated employer contributions include contributions that an employer makes to satisfy the requirements of a particular award, certified agreement or the Superannuation Guarantee provisions.
Tax file number (TFN) quotation
In order to accept a contribution other than an employer contribution, the member’s TFN must have been quoted to the fund. Note that while employer contributions can be accepted where a fund does not hold the member’s TFN, additional tax may apply to the contribution, known as ‘no-TFN contributions tax’.
What if a fund accepts a contribution when the member is not eligible?
A superannuation fund that receives a contribution in a manner that is inconsistent with the above requirements has 30 days from when the fund first became aware of the inconsistency to return the contribution. In the case of SMSFs, the ATO’s view is that the fund is generally taken to be aware that the amount is inconsistent with the requirements when it receives the contribution2.
However, for a contribution that is subject to the TFN quotation requirement, a fund is not required to return the amount if the member’s TFN is quoted to the fund within 30 days of receiving the contribution.
What if the 30 day period for returning the contribution has expired?
In ATO ID 2009/29, the ATO expresses the view that an SMSF trustee is required to return the amount of a contribution that has been accepted in a manner that is inconsistent with the contributions standards, even if more than 30 days has expired since the trustee became aware of the inconsistency.
Accepting late contributions
In cases where a member is not eligible to contribute because they don’t satisfy the age and work test requirements, a superannuation fund may accept a contribution for the member if the trustee is reasonably satisfied that the contribution relates to a period when the member was eligible to contribute. Importantly, where this discretion is exercised by the trustee of a super fund, it does not change the timing of the contribution for tax purposes (including contribution cap purposes).
Macquarie Contribution Cap Companion