Retiring this year? What to know before starting a super pension

If you’re retiring this financial year it pays to think about possible issues before you start drawing down on your superannuation.

Why?

Because your age, your total super balance, and your ability to make additional contributions now or down the track could all play a part in your decision-making.

So, before you flick the switch to retirement phase, here are a few issues and strategies to consider.

Be aware timing when you want to make contributions

Anyone younger than 75 can make personal contributions to super, but if you want to claim a tax deduction for your contribution and you’re 67 or more, you’ll need to meet the work test.

If you’re under 67, you can contribute and claim a deduction without needing to meet the work test.

Under the work test, if you are 67 or more (but under 75) you must work 40 hours in any 30 consecutive days in the financial year to claim a tax- deduction for personal super contributions made that year.

If you don’t meet the current requirements of the work test and want to make a tax-deductible contribution, there is an exception that may help.

Under the work test exemption, you can claim a tax deduction for personal contributions this financial year if you:

• don’t meet the work test in the current financial year
• your total super balance was less than $300,000 on 30 June last financial year, and
• you met the work test last financial year

This is designed to give retirees more time to arrange their finances.

Personal contributions you don’t claim as a deduction are possible until you turn 75, even if you don’t meet the work test.

Unfortunately, if it’s been more than 28 days since the end of the month you turned 75, you’re not eligible to make any personal contributions to super except downsizer contributions. Continue reading for more on the downsizer contribution later.