Can I top up my super at 55 if I’m not working? Here’s what you need to know

Question: I am about to turn 55 and have less than $150,000 in superannuation and have not contributed over the last 10 years. My savings are currently in term deposits, but will come up for renewal soon. My annual income is about $20,000 from investments including the term deposits. Even though I am not working, can I add to my superannuation and if so, how?

You can contribute to your existing super fund a number of ways and there are no real restrictions until you reach the age of 67. Your super fund’s website should explain the process of making a payment to your account via BPay or a fund transfer from your bank, you just need to decide what type of contribution you’ll be making.

A Concessional contribution is one where you, or an employer, can claim a tax deduction. There is no “work test” to be satisfied because you are under 67 years of age. Over 67 and less than 75, you would need to have worked at least 40 hours in a 30 consecutive period to be able to make a concessional contribution to super.

Because a concessional contribution is subject to at least a 15 percent contributions tax, we need to compare this to the level of income where below that figure, you wouldn’t pay any personal income tax. For a person under age pension age, this amount is $22,575 which allows for the low income tax offset.

In your case and with $20,000 of passive income, there is no benefit in making a concessional contribution to super.

The other type of contribution is a non-concessional contribution. Non-concessional contributions are not tax deductible. There is an annual limit or cap of $120,000 for non-concessional contributions and with your current balance of $150,000, you could also “bring-forward” up to three years of contributions or a maximum of $360,000.

If you do any paid employment, including self employment for the year and if that before-tax income represented 10 percent or more of your total annual income, you could also qualify for the Government co-contribution. This $500 “free” payment applies to non-concessional contributions of $1,000 and if your total income for the year is less than $45,400.

A final contribution method is where your partner makes a spouse contribution of up to $3,000 and he or she becomes eligible for an 18 percent tax offset or a maximum $540 tax credit. That may boost your partner’s tax refund or reduce any tax liabilities. This rebate only applies if your taxable income for the year remains under $40,000.

Question: I am a self funded retiree and 71 years of age. With my wife aged 51, I am being a realist in saying it is likely that I will die before she does. I receive a pension from my Self Managed Super Fund and want to know how this income stream would be taxed now if I passed and then what happens after she reaches 60 years of age?

Given that she is classified as both a dependent and tax-dependent under the relevant acts, any lump sum payments or income stream payments made to her, would be tax-free at any age. They are not included as part of her assessable income and are not subject to tax or Medicare levy.

It becomes more complicated if you were under 60 and or she was also under 60 at the time of your passing and a non tax dependent. Since you are considering these issues, you should also ensure that if the pension was not set up as a reversionary arrangement where in effect, she is a joint owner, you have completed the required documentation such as a non-lapsing binding death benefit nomination.

Ideally, you will have one or the other, but not both to avoid confusion and complications.

If not already in place, you should also have your wife nominated as your Attorney using an Enduring Power of Attorney. While ideally, we would all like our own passing to be quick and painless, sometimes long-term medical conditions can prevail and ideally, you should prepare for this possibility with an EPA.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.