Page 4 - Advice Matters Magazine - FWP - Dec 24

How a super recontribution strategy

could improve your tax position

Withdrawing part of your superannuation fund beneficiaries you have nominated to receive your death
balance then paying it back into the account, benefit are considered non-dependants for tax purposes.
known as a recontribution strategy, may sound (The definition of a dependant is different for super and
a little strange but it could deliver a number of tax purposes.)
benefits including reducing tax and helping to Recontribution strategies can be very helpful for estate
manage super balances between you and your planning, particularly if you intend to leave part of your
spouse. super death benefit to someone who the tax law considers
Your super is made up of tax-free and taxable components. a non-tax dependant, such as an adult child.
The tax-free part generally consists of contributions Otherwise, when the taxable component is paid to them,
on which you have already paid tax, such as your non- they will pay a significant amount of the death benefit in
concessional contributions. tax. (Your spouse or any dependants aged under 18 are
When this component is withdrawn or paid to an eligible not required to pay tax on the payment.)
beneficiary, there is no tax payable.
Some non-tax dependants face a tax rate of 32 per cent
The taxable component generally consists of your (including the Medicare levy) on a super death benefit, so
concessional contributions, such as any salary sacrifice a strategy to reduce the amount liable for this tax rate can
contributions or the Super Guarantee contributions your be worthwhile.
employers have made on your behalf. By implementing a recontribution strategy to reduce the
You may need to pay tax on your taxable contributions taxable component of your super benefit, you may be able
depending on your age when you withdraw it, or if you to decrease – or even eliminate – the tax your non-tax
leave it to a beneficiary who the tax laws consider is a dependant beneficiaries are required to pay.
non-tax dependant.
Watch the contribution and withdrawal rules
How recontribution strategies work Our retirement system has lots of complex tax and super
The main reason for implementing a recontribution rules governing how much you can put into super and
strategy is to reduce the taxable component of your super when and how much you can withdraw.
and increase the tax-free component. Before you start a recontribution strategy, you need to
To do this, you withdraw a lump sum from your super check you will meet the eligibility rules both to withdraw
account and pay any required tax on the withdrawal. the money and contribute it back into your super account.
You then recontribute the money back into your account as If you would like more information about how a
a Non-Concessional Contribution (NCC). If you withdraw recontribution strategy could help your non-dependants
this money from your account at a later date, you don’t save tax, give our office a call today.
pay any tax on it as your contribution was made from
after-tax money.
The recontribution doesn’t necessarily have to be into your
own super account. It can be contributed into your spouse’s
super account, provided they meet the contribution rules.
To use a recontribution strategy you must be eligible to
both withdraw a lump sum and recontribute the money
into your account. In most cases this means you must
be aged 59 to 74 and retired or have met a condition of
release under the super rules.
Any recontribution into your account is still subject to the
current contribution rules, your Total Super Balance and
the annual contribution caps.
Benefits for your non-tax dependants
Recontributing your money into your super account may
have valuable benefits when your super death benefit is
paid to your beneficiaries.
A recontribution strategy is particularly important if the

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DECEMBER 2024