A re-contribution strategy can be a useful estate planning tool for those who want to minimise the taxable component of their superannuation death benefit paid to non-dependants such as adult children. This strategy involves withdrawing funds from a super account and then re-contributing them back into the account as a non-concessional contribution, effectively converting the taxable component of the withdrawal into a tax-free component.
To implement this strategy, you must meet a condition of release such as retirement or attaining age 65, and have available contribution cap space. The recent changes to the work test and total super balance thresholds for non-concessional contributions have added more flexibility for you to implement this strategy.
The new rules allow those between 67 and 75 years of age to make non-concessional contributions without meeting the work test. Additionally, the total super balance thresholds that can affect a your non-concessional contributions cap will be indexed by $200,000 for the next financial year, potentially opening up the re-contribution strategy to those who were previously unable to use it due to exceeding the cap.
Implementing a withdrawal and re-contribution strategy can be complex and should be carefully considered in consultation with a financial advisor or accountant. The strategy may have implications for a those eligible for government benefits, your overall retirement income, and the tax implications for your beneficiaries upon your death.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
