Withdrawing part of your superannuation fund balance then paying it back into the account, known as a recontribution strategy, may sound a little strange but it could deliver a number of benefits including reducing tax and helping to manage super balances between you and your spouse.
Your super is made up of tax-free and taxable components. The tax-free part generally consists of contributions on which you have already paid tax, such as your non-concessional contributions.
When this component is withdrawn or paid to an eligible beneficiary, there is no tax payable.
The taxable component generally consists of your concessional contributions, such as any salary sacrifice contributions or the Super Guarantee contributions your employers have made on your behalf.
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 annual contribution caps.
Ensure you speak to us before acting, as we can help determine if you are eligible and calculate whether this type of strategy is a worthwhile addition to your estate planning.
If you would like more information about how a recontribution strategy could help your non-dependents save tax, give our office a call today.