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What is gainful employment under superannuation regulations?

What is gainful employment under superannuation regulations?

As your superannuation savings are meant to support you when you’re no longer working, the regulations define what is considered to be working. This definition comes into play if you’re accessing your super before you turn 60 and if you want to contribute to your super after the age of 67. 

What is the gainful employment definition for accessing your super?

One of the conditions of release that can help you access your super savings is to reach preservation age and retire. Depending on the year you were born, your preservation age could be between 55 and 60.

Superannuation rules from the Australian Taxation Office (ATO) state that if you’re aged below 60 and want to access your super, then you must have ceased gainful employment and have no intention of returning to such employment in the future.

But can you can work at all after you retire if you’ve accessed your super? Can you do voluntary work or work on a casual basis? And what happens if you need to return to part-time or full-time work? 

When you notify your super fund that you want to access your super, they need to check whether you meet the conditions of release. They will ask you to submit documents proving that your employment contract has ended and sign a declaration that you have no intention of returning to gainful employment. The super fund is supposed to check that this is genuinely your intention. 

Gainful employment is defined as being employed or self-employed for monetary gain or reward. This gain or reward could be in the form of salary, wages, commissions, share of profits, bonuses, or gratuities. 

Here’s what you should know if you’re signing such a declaration.

  • You can still work under 10 hours a week, as this is considered casual employment. 
  • Voluntary work for charities will not be considered gainful employment. You can be reimbursed for some expenses you incur, provided you’re not being paid for your time or skills.
  • If you’re not working currently but looking for contracts, your super fund managers may decide that you don’t meet one of the conditions of release - having no intention of returning to work.
  • Passive income from investments, in the form of dividends, rent, etc, is not counted as gainful employment. 
  • If you perform substantive duties in a family trust or company and receive dividends from profits, the ATO may scrutinise whether this is passive income or gainful employment. 
  • If you decide to go back to work in the future, you may need to prove to the ATO that your intention not to work was genuine at the time when you signed the declaration. 

Remember that you don’t need to worry about the definition of gainful employment if you access your super after the age of 60, and you’re free to take up part-time or full-time work. 

The superannuation work test for being gainfully employed after 67

Aussies still working after 67 who want to make voluntary, before-tax contributions to their super need to pass a work test every year. This work test is to prove that they have been employed for 40 hours or more in any 30-day period during the financial year. 

Your super fund will give you a work test declaration form at the end of the financial year. Provide the details, sign the form and return it to your super fund. You will get a confirmation from them that your declaration has been received.

The Australian Government has announced that there will be changes to the superannuation contribution rules for individuals between 67 to 74 years old. These changes will come into effect in July 2022. Individuals between 67 to 74 years old will be able to make or receive personal contributions and salary sacrificed contributions without going through the work test, as long as their contribution is within the cap.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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