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Superannuation

Work test declaration significance increased

work test declaration

An individual’s declaration the work test has been satisfied is now more significant as it must be made to the ATO and not the super fund.

A technical manager has warned superannuation members and their advisers to recognise and ensure compliance with the new work test declaration regime for individuals above the age of 67 who are looking to make deductible personal contributions.

Changes to the work test rules will see superannuants declare they have satisfied the work test to enable them to claim a tax deduction for a contribution to the ATO on their tax return and not to the super fund trustees.

“A lot of questions [relate to] how the tax office is going to know [if the work test has actually been satisfied],” BT Financial Group technical consultant Matt Manning revealed.

“So part of the tax return will include ticking a box to say ‘I have been gainfully employed for at least 40 hours over a consecutive 30-day period during the financial year the contribution occurs’, or alternatively ‘I have met the three criteria to satisfy the work test exemption’. So basically you, as the client, are making that declaration to the tax office.”

According to Manning, members should take this obligation most seriously as severe penalties can result from making a false declaration on a tax return.

Further, he recommended superannuants should not underestimate the ability of the ATO to detect a false declaration of this kind.

“How would it know? I would presume the ATO would look at the rest of the tax return [to determine this],” he said.

“[I think] it would be reasonably easy [for it to say] ‘I wonder how they made that work test declaration when they haven’t declared income under question one of the tax return’, or ‘we don’t have a group certificate from an employer and we don’t have any income declared under self-employment’.

“So as far as the ATO goes, I imagine it probably wouldn’t be too hard for it in most cases to work out when false declarations have been made, and if anything [do so more easily] than a super fund because the ATO has [the individual’s] full tax [records].”

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