Understanding Gainful Employment and Superannuation
The concept of gainful employment is crucial for determining eligibility to make certain super contributions and access superannuation benefits. Whether you’re planning contributions after age 67 or seeking to access super under retirement conditions, understanding gainful employment can help ensure compliance with superannuation laws.
Key Applications of Gainful Employment
Contributing to Superannuation After Age 67:
Individuals aged 67 to 74 must meet the work test or qualify for the work test exemption to claim a tax deduction for personal contributions.
Work test requirements:
Be gainfully employed for at least 40 hours over 30 consecutive days in the financial year of contribution.
Accessing Superannuation Benefits:
For members aged 60 to under 65, accessing preserved super requires satisfying retirement conditions, which include:
Ceasing a gainful employment arrangement.
Declaring an intention not to return to work for 10 or more hours per week.
What Is Gainful Employment?
Gainful employment is defined as being employed or self-employed for gain or reward in any business, trade, profession, vocation, or employment. The definition includes two key components:
Employment or Self-Employment:
Involves a contractual relationship or the operation of a business.
Gain or Reward:
Includes remuneration such as salary, wages, business income, bonuses, or in-kind payments.
Common Scenarios of Gainful Employment
Employment Indicators:
A person is considered employed if:
They are under an employment contract.
The employer controls work conditions and bears commercial risk.
PAYG withholding tax is applied.
Self-Employment Indicators:
A person is considered self-employed if:
They operate a business or trade independently.
They demonstrate regularity and intention to profit.
Business activities are conducted in an organised, professional manner.
Special Cases:
Domestic Work: Babysitting or assisting family members is typically not gainful employment unless formally contracted.
Investment Management: Actively managing personal investments is not considered gainful employment unless it constitutes carrying on a business.
Voluntary Work: Volunteer activities usually fail the employment requirement, as they lack contractual obligations.
The Work Test and Exemption
Meeting the Work Test:
Required for individuals aged 67 to 74 making personal deductible contributions.
Satisfy by being gainfully employed for at least 40 hours over 30 consecutive days.
Work Test Exemption:
Available for recent retirees aged 67 to 74 who:
Met the work test in the prior financial year.
Have a total super balance below $300,000 as of 30 June of the previous financial year.
Have not previously used the exemption.
Accessing Super After Ceasing Gainful Employment
For members aged 60 or over:
Ceasing a single gainful employment arrangement satisfies retirement conditions of release.
Additional contributions made post-retirement will remain preserved until another condition of release is met.
