Again this is one of the other most common questions. It is crucial to get these requirements correct, as very often, trustees may find themselves in an unfavourable position and could also result in excess contribution tax.

We have summarised the requirements below for your easy use.

Work test

The work test requires the member to be gainfully employed, i.e. must work for at least 40 hours during a 30 consecutive day period each financial year. Work test must be satisfied before making the contribution.

  • Mandated employer contributions can be made at any age without satisfying the work test.
  • Work test can be met anywhere in the world.

Gainfully employed

If a person is an employee any time during the income year, 10% rule needs to be met in order for the person to claim a tax deduction on the personal contributions.

  • Gainfully employed is employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment
  • Unpaid employment does not constitute “gainfully employed”
  • Gain or reward includes receipt of remuneration such as salary or wages, business income, bonuses, commissions, fees or gratuities
  • Prospective employment cannot be considered as gain or reward.

What is the 10% rule?

The 10% rule is:

No more than 10% of:

  • The total assessable income for the income year, plus
  • reportable fringe benefits (RFB) for the income year, plus
  • reportable employer superannuation contributions (RESC) for the income year must be attributable to employment.

 

Assessable Income
(from employment)
+ RFB + RESCs
__________________  < 10%
Assessable Income
(from all sources)
+ RFB + RESCs

 

NOTE:  Employment is where the person is treated as an employee for SG purposes. A person may be treated as an employee for SG purposes even where they do not receive any SG support (E.g.: Employee earning less than $450 per month).