The government has provided clarification on how the repealing of the work test rule will operate for people approaching age 75 in conjunction with the non-concessional contribution (NCC) bring-forward rule, which are both set to change following announcements made in the recent federal budget.
SMSF Association deputy chief executive and policy and education director Peter Burgess said the industry body had contacted Treasury seeking further clarification on this point, as well as the retrospective cut-off date for legacy pensions that are subject to a two-year transfer window.
In a post on the association’s website, Burgess said the budget announced the work test would be repealed for individuals aged 67 to 74, while the budget papers stated individuals in that age bracket would also be able to access the NCC bring-forward rule.
This, in turn, had raised questions about how the NCC bring-forward rule would work for people approaching age 75 and if the proposed change would supersede a bill currently before parliament to extend the NCC bring-forward arrangements to people aged 65 and 66 from 1 July 2020.
“The SMSF Association has received confirmation that the government remains committed to passing the NCC bring-forward rule changes which are currently before the parliament as soon as possible,” Burgess said.
“Treasury has also confirmed the federal budget measures to extend access to the NCC bring-forward rule to individuals aged 67 to 74, however, the ability to access the bring-forward rule is likely to be phased out or reduced as individuals reach age 75.
“The rationale for this is that individuals have never been able to make voluntary superannuation contributions beyond the age of 74, so allowing an individual who is aged 74 to bring forward two years’ worth of NCC contributions would enable them to access a contribution period which is not intended by this budget measure.
“Under the current law, someone who is approaching age 67 could still make NCCs beyond the age of 67 if they satisfy the work test.”
On the issue of legacy pensions, he said the proposed changes will allow individuals to exit a range of legacy retirement products, along with any associated reserves, for a two-year period, but further information in the budget papers appeared to restrict this to products that were first commenced prior to 20 September 2007.
Burgess revealed the association had checked this with Treasury, which “confirmed this measure will apply to the specified range of legacy pensions commenced prior to 20 September 2007, even if the pension has subsequently been restructured as a market-linked income stream, or if it was a market-linked income that has been commuted and restarted as a market-linked income stream on or after 20 September 2007”.''