The SIS Contribution Acceptance Rules

The SIS Act and Regulation imposed certain rules on super funds accepting contributions.

The rule which is relevant in the present context is the “work test” rule which applies to contributions made by or in respect of a super investor who has turned age 65.  The “work test” rule is that if a super investor has turned age 65, then for the fund to accept any contributions in respect of a financial year made by or in respect of the super investor, the super investor must have first satisfied the work test by being gainfully employed for at least 40 hours in a period of no more than 30 consecutive days which occurred in that financial year.

To explain the interaction between the contribution caps (which are Tax rules) and the fund contribution acceptance rules (which are SIS Act rules) consider Edward again.

If Edward made non-concessional contributions of $155,000 in respect of 2009/10 financial year, Edward will have invoked the “bring forward” rule for 2009/10, 2010/11 and 2011/12 financial years.  Edward’s non-concessional contribution cap for 2011/12 will be $295,000 and Edward’s non-concessional contribution cap will be $295,000 less the non-concessional contributions made by or for Edward in the previous year.

If Edward turned age 65 on 1 July 2010, he would have to satisfy the work test before the fund could accept any non concessional contribution by or for him.  The test is that Edward must be gainfully employed for 40 or more hours in a consecutive period of not more than 30 days.  If Edward works for 20 hours per week in the first two weeks of July 2010, he will have satisfied the work test by the third week in July 2010 and his SMSF could accept non-concessional contributions by or for Edward.

If during 2010/11 Edward made $60,000 non-concessional contributions, his non-concessional contributions cap for 2011/12 would be $235,000.

Edward would again have to satisfy the work test in respect of 2011/12 before his SMSF could accept any non concessional contributions for him during 2011/12.

If Edward only satisfied the work test at the end of October in 2011 then his SMSF could, from November 2011 onwards, accept non-concessional contributions for him the rest of that financial year.  If Edward contributed $15,000 of non-concessional contributions for 2011/12, the unused cap for 2011/12 (being $220,000) could not be carried forward to 2012/13.

Edward’s non-concessional cap for 2012/13 would be $150,000 and, as Edward will be more than 65 on 1 July 2012, he can no longer invoke the “bring forward” rule.