Super contributions can now be made for those aged 75+

Comedian George Burns continued to work until shortly before his death, in 1996, at the age of 100. Presumably he was working for love and not money. Certainly he was not working for super, because he could not have had contributions made to his fund under the legislation that then existed. That has been the traditional position: when someone attains age 75, they can not have any superannuation contributions made in respect of them.

However, the traditional position has recently changed!

Background

Up until 1 July 2013, at the risk of oversimplifying, the situation was broadly as follows.

In respect of members under 65 years of age, trustees of regulated superannuation funds could generally accept any contributions.

In respect of members between 65 and 74 years of age, trustees could accept:

• ‘mandated employer contributions’; and
• if the member had been gainfully employed on at least a part-time basis during the financial year in which the contributions were made, both employer contributions and member contributions.

In respect of members between 65 and 69 years of age, trustees could also accept certain payments from first home saver accounts.

Finally, in respect of members who had attained age 75, trustees could also accept ‘mandated employer contributions’. Apart from ‘mandated employer contributions’, trustees broadly could not accept any contributions in respect of a member aged 75 or more.

The changes hinge off ‘mandated employer contributions’.

Note that if a trustee received a contribution in a manner inconsistent with the above, the trustee must return the amount to the contributor within 30 days of becoming aware of the inconsistent manner.

These rules are all set out in regulation 7.04 of the Superannuation Industry (Supervision) Regulations 1994 (Cth).

What is a ‘mandated employer contribution’?

Regulation 5.01 of the SISR defines mandatory employer contributions as including items under two limbs.

One limb is employer contributions under an agreement certified, or an award made, after 30 June 1986 by an industrial authority. Naturally, this was and is very rare and few if any superannuation fund members who have attained age 75 receive contributions pursuant to this limb.

The other limb is more relevant. It broadly covered employer contributions required under the superannuation guarantee legislation. More specifically, it covered contributions made by, or on behalf of, an employer to a fund in relation to a member, that:

• reduce the employer’s potential liability for the superannuation guarantee charge imposed by
• s 5 of the Superannuation Guarantee Charge Act 1992 (Cth); or
• are payments of shortfall components.

This second limb only had limited application because up until recently salary paid to an employee age 70 or more was excluded from the superannuation guarantee legislation. (See the former s 27(1)(a) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (‘SG Act’).)

However, changes to the SG Act have had a flow on effect for ‘mandated employer contributions’ and thus the ability for those age 75 or more to have superannuation contributions.

Changes to the SG Act

The explanatory memorandum that accompanied the Superannuation Guarantee (Administration) Amendment Bill 2011 (Cth) said that the Bill would ‘raise the superannuation guarantee (SG) age of an employee at which the SG no longer needs to be provided from 70 to 75’.

However, the Bill was altered in its passage through parliament. Specifically, the ‘cap’ of 75 years of age was removed altogether. The Honourable Bill Shorten described this change as follows:

Currently, the superannuation guarantee only applies to people under 70. The current legislation will lift the SG limit to 75.

However, as a result of the strong representations from the members of the Labor caucus and backbench, including not least the member for Petrie and the member for Blair, and from the crossbench the member for Lyne and the member for New England, we have decided to remove the age limit for superannuation contributions altogether.

This means that an additional 18,000 Australians over the age of 75 will get the benefit of superannuation if they continue working. This will commence on 1 July 2013 to provide sufficient lead time for older Australians and their employers to adjust.

Accordingly, when ultimately passed as an Act, rather than raising the maximum age for compulsory superannuation to 75, it meant that the concept of a maximum age was abolished altogether!

The change to the SG Act took effect from 1 July 2013. Accordingly, the change to the definition of ‘mandated employer contribution’ took effect from 1 July 2013.

How can a member aged 75+ now contribute to superannuation?

Even from 1 July 2013, members aged 75 or more still can not make non-concessional contributions. Rather, only the following can be made:

• contributions pursuant to agreement certified, or an award made, on or after 1 July 1986 by an industrial authority (such contributions are exceedingly rare); and
• contributions that an employer is required to make under the superannuation guarantee legislation.

Accordingly, the changes have not been a ‘carte blanche’ for those aged 75 or more. This is especially the case because the SG contributions do not apply to quarterly earnings above a ‘maximum contribution base’. The maximum contribution base is indexed each year. For the 2014 income year, the maximum contribution base is $48,040 per quarter.

Therefore, the maximum amount of superannuation contributions per quarter in the 2014 income year is $4,443.70 (ie, $48,040 x 9.25%) and the annual maximum is $17,774.80 (ie, $4,443.70 x 4).

In short, even an employee aged 75 or more whose earnings each quarter for the 2014 income year are $48,040 or more, would probably only be allowed to receive superannuation contributions of $17,774.80.

There are certain exceptions to the above though. Namely, a member aged 75 or more might also be able to receive more than $17,774.80 of contributions if:

• the member had another employer;
• the member had contributions made pursuant to agreement certified, or an award made, on or after 1 July 1986 by an industrial authority (again though, such contributions are exceedingly rare); or
• a certain ‘cheque is in the mail’ exception applies in respect of pre-75 contribution. That is, if the member had been gainfully employed on at least a part-time basis during the financial year in which the contributions were made and the contributions are received within 28 days of turning 75.

Conclusion

Since 1 July 2013, there is now a greater ability for those aged 75 or more to receive superannuation contributions. It is not a ‘carte blanche’ situation though, but with care the hardest working men and women of show business (and all other businesses) can be properly superannuated.

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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.