If you’re aged between 67–75 and want to claim a tax deduction for a personal super contribution, you must meet the work test (or a one-off work test exemption).

The work test requires that, at some time in the financial year, you were gainfully employed for at least 40 hours in any 30 consecutive days during the year. To be “gainfully employed” you must be either employed or self-employed (running a business) for gain or reward. It does not include unpaid work or purely passive income (like rent, dividends or interest).

Are you really running a business?

Whether or not you are an employee should be straight forward to determine. Self-employment can be tricky. The ATO looks at the overall picture. The more of these you can say “yes” to, the more likely you’re in business and therefore “gainfully employed”:

• Profit purpose and prospect: Do you intend to make a profit, and is there a realistic prospect of doing so (even if not yet profitable)?
• Size and scale: Is your activity of a sufficient size/scale to make a profit (eg, meaningful turnover, stock, equipment, or capital committed)?
• Repetition and regularity: Are activities repeated and continuous (not one-off or ad hoc)?
• Business-like manner: Do you keep proper records, have a separate account/ABN, advertise, hold licenses/qualifications, operate from premises, follow a plan/budget?
• Not a hobby or mere investment: Is what you’re doing more than a hobby/recreation or simple passive investing?

Business or hobby

A business might include a regular market stall or online shop with an ABN, where your goal is to make a profit. You have detailed bookkeeping and actively market your product marketing. In contrast, a hobby might include occasional craft sales to friends where no records are kept and you do not intend to make a profit.

If you are employed or running a business, can you satisfy the work test?

To satisfy the work test, you need to be gainfully employed (as an employee or from your business) for 40 hours in any 30-day period during the financial year. If you meet it, you can claim a deduction on personal super contributions in that financial year.

Work test exemption

If you don’t meet the work test this year, you may still contribute and claim a deduction if all these are true:

1. You met the work test in the previous financial year
2. Your total super balance was under $300,000 at 30 June of the previous year, and
3. You’ve never used the exemption before.

Timing near age 75

Funds can accept certain personal contributions up to 28 days after the end of the month you turn 75. Past that, options are limited to employer super guarantee and downsizer contributions (if eligible).

Give us a call

Navigating the rules for claiming tax deductions on personal super contributions can be complex at the best of times. The rules are even trickier for people between ages 67 and 75, but understanding the work test is key. Give us a call if you need help claiming a deduction on personal super contributions.