Superannuation Re-Contribution Strategy

What is the Superannuation Re-Contribution Strategy?

A superannuation re-contribution strategy has the effect of increasing your tax-free component within superannuation. Whilst this is good for any future withdrawals, its main purpose is generally to improve the tax status of your retirement benefits for your beneficiaries. When super or a retirement pension is paid to a non-dependent such as an adult child, tax may be payable. The tax-free component, however, will always be tax-free to a beneficiary.

How does it work?

The key is to ensure that you can still make contributions to super. You don’t want to take money out to put back in if you don’t qualify to make contributions.

Step 1: Withdraw from super.

In order to do so, you must satisfy a condition of release such as preservation age and retirement. When you make the withdrawal, there may be tax payable on the withdrawal. Assuming you have reached preservation age, the tax rates are as follows:

Age	Limit	Max tax rate (%)
Taxable component – taxed element
60 and over	Non-assessable non-exempt income	0%
Preservation age to 59	First $230,000 (low-rate cap)	0%
	Balance over $230,000	15%
Taxable component – untaxed element
60 and over	First $1.650 million (untaxed plan cap)	15%
	Balance over $1.650 million	45%
Preservation age to 59	First $230,000 (low-rate cap)	15%
	Over $230,000 and under $1.650 million	30%
	Balance over $1.650 million	45%
Tax-free component
Any age	All	0%

Step 2: Re-contribute back to super.

Once you have the net proceeds of your super withdrawal, you can make the contributions back to super as a non-concessional contribution. Conditions and caps apply. Your contribution will now form part of the tax-free component of your super fund.

What are the benefits?

Your withdrawal may be made up of a combination of tax free and taxable components. When you re-contribute this to super, it will be tax free. This is especially favourable for estate planning where non-dependants may receive the proceeds of your superannuation. The tax-free component will be received tax free, regardless of their dependency status.
If you are over 60, there is no tax payable on the taxable component of your withdrawal.
If your taxable component (taxed element) is below the low-cap threshold, there is no tax payable on this component of your withdrawal.

What should I be thinking about?

You must meet a condition of release to be able to withdraw from your superannuation.
You must be eligible to contribute to make the re-contribution back into superannuation.
There may be tax payable on the taxable component of your superannuation at withdrawal. This will be deducted from the withdrawal providing a net payment to you.
Transaction costs may apply to the sell down and re-purchase of investments if there is no cash available to meet the withdrawal amount.
A non-concessional contribution cap applies to the amount you put back into superannuation. You can only make a non-concessional contribution if your balance is less than the Transfer Balance Cap.
The bring-forward rule allows you to bring forward another 2 years of non-concessional cap into the current financial year. This rule is limited by your Total Super Balance.

Important information regarding this information

This information is of a general nature. It does not consider your personal objectives, needs or situation. It does not represent legal, tax or personal advice and should not be taken as such. If it has been provided to you with a Statement of Advice (SoA), you should rely on the personal advice in the SoA.

Care has been taken to provide up to date and accurate information relating to the subject area however BR Advice Pty Ltd (ABN 30 612 056 523, AFSL 488655), Blue Rock Private Wealth Pty Ltd (ABN 95 166 927 055, AFSL 452733), Blue Rock Private Wealth (Melb) Pty Ltd (ABN 48 652 202 698, ASIC AFS No. 1298365) and their representatives make no representation as to its accuracy or completeness.

Published: September 2022.