CGT Strategy highlighted with work test exemption

In December last year, the government finalised the regulations for the work test exemption measure which enables individuals aged 65 to 74 to make voluntary contributions to superannuation for an additional 12-month period from the end of the financial year in which they last met the work test.

In order to be eligible, they have to have a total superannuation balance of less than $ 300,000. According to the ATO website, the regulations will take effect from 1 July this year.

Advisers Digest director Peter Johnson said one of the ways the exemption could be beneficial for SMSF clients is where they want to sell a significant asset and contribute the proceeds from the disposal of that asset into their super fund.

The client may have an asset they wish to sell that is subject to capital gains. If they sell the asset they are going to have a capital gain, and if they want to contribute the sale proceeds to super, they will have to realise that gain in the same year as they are still working.

Under the work test exemption, however, they may be able to sell the asset and then still contribute the money to super in their first year of retirement, he said.

For a couple, he said, each spouse will be able to contribute $ 100,000 in non-concessional contributions and $ 25,000 in concessional contributions.

The government also made an amendment to the regulations which allows members to trigger the bring forward rules under the exemption, which was restricted under the original draft legislation.

The work test exemption could also be useful for those receiving an employment termination payment in July and will be retiring afterwards, he said.