A superannuation recontribution strategy is a strategy designed to maximise the amount of after tax income for a retiree under 60, or non-dependent beneficiaries (e.g. an adult child) of their estate.

To lower the tax payable on a retirement income stream or death benefit payment to a non-dependent, the superannuation member accesses their superannuation and contributes the money back into superannuation as a non-concessional contribution. The money then forms part of the tax free component of the superannuation account.

Woah, what?

For example, Penelope is 61 and of ill health. Her son, Cruz, is 34 and a non-dependent under tax law. Penelope could take a superannuation lump sum (tax free) and recontribute it to her superannuation as an after tax contribution (known as a non-concessional contribution). Then, if she passes, the money might be paid to Cruz tax free.

If she did not do this, the super fund may have to withhold tax on Cruz’s super benefit.

There are limits on superannuation withdrawals and non-concessional contributions. So, as always, you should speak to a qualified professional before taking action on the factual information presented here.

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