Q: I fully retired in May 2019 when I turned 66. I invested all my Superannuation into an Account-based Pension at the time. The value was $220,000 and is currently worth around $235,000. I have just received an inheritance of $110,000, am I able to invest this money into Superannuation to provide me with income in retirement?
A: In order to be eligible to make superannuation contributions, individuals aged 65 to 74 must first meet a work test, which requires a minimum of 40 hours work in a consecutive 30 day period during the financial year.
There is an exemption if you are aged 65 to 74 with a total Superannuation balance below $300,000(measured at 30 June of the previous financial year). Under this scenario, you are able to make voluntary Superannuation contributions in the financial year after you cease work without the Work Test applying.
The current Concessional Superannuation cap of $25,000 and Non-Concessional Superannuation contribution cap of $100,000 in a financial year will continue to apply.
Based on the information provided, as your total Superannuation balance was less than $300,000 at 30 June 2019, you should be eligible to utilise the work test exemption. As such, assuming you haven’t made any non-concessional contributions in recent years, you can contribute up to $100,000 of the inheritance as a Non-Concessional Superannuation contribution.
Further, if you have other taxable income, you may be able to make a personal tax deductible superannuation contribution with the remaining $10,000 which is measured against the $25,000 concessional contribution limit. Note you would only make a personal deductible Superannuation contribution if your personal income tax rate was higher than the 15% Superannuation contribution tax rate.
Note: This notification will need to occur within specified timeframes and before you commence any subsequent pension.
Once you have contributed the inheritance into a Superannuation fund, you can commence a new account-based pension with these monies.
Please note that once you have used this work test exemption, you will not be able to make contributions to Superannuation after 30 June 2020 unless you later satisfy the work test (as described above).