What A Difference An Extra Year Could Make

The 12-month work test exemption gives new retirees with a low superannuation balance the chance to enjoy a better lifestyle.

- Vita Palestrant

Living off a low super account balance in retirement can be a daunting prospect. It’s one that baby boomers dread, having entered the workforce long before compulsory super was introduced. Many are far short of the $640,000 a couple are estimated to need for a comfortable retirement.

It is something the federal government is trying to address with the work test exemption for recent retirees. Announced in the 2018-19 budget, the measure comes into effect this month.

Under the old rules once you turned 65 you had to meet the work test to make super contributions. You had to work at least 40 hours in 30 consecutive days during the financial year in which contributions are made. But new retirees won’t need to meet this test.

From the start of this financial year – July 1, 2019 – people aged 65-74 with a total super balance of less than $300,000 will be able to make voluntary contributions to super for one more year after they stop work despite not working.

Glen McCrea, deputy CEO, and chief policy officer of the Association of Superannuation Funds of Australia (ASFA) say it’s a positive measure given the median super balance for people aged 65-74 is only about $170,000.