Recontributing some of your super could pave the way for a brighter retirement and help you leave more for your children when you pass away.

Make your super work smarter

When you’re ready to retire, there’s some simple things you can do to get more from your super – not just
for you, but your loved ones too. One option is to use what’s known as the ‘recontribution strategy’.

This is where you:

1. withdraw some of your super, which may be done tax-free when you permanently retire after reaching age 60,
   or meet certain other conditions, and
2. put the money back into your super (or your spouse’s super), if eligible, by making a ‘non-concessional’ (after-tax) contribution.

While it might sound like this wouldn’t achieve much, recontributing super could make a big difference.

It may save thousands of dollars in tax when you pass away if your super is paid to a ‘non-tax dependent’,
such as an adult child. It may also benefit you and your spouse now – by helping you to maximise super contribution and retirement income opportunities.

Reduce tax for your beneficiaries

Our super balance is generally made up of two components that can impact the tax payable – while you
are alive and when you pass away. These are the taxable and tax-free components.

By recontributing super, you can convert some of the taxable component into the tax-free component and reduce the tax payable on ‘death benefits’ by non-tax dependents, which is currently 17%¹. The result? More of your super will go to the people you want and less in tax. For example, recontributing $360,000 (using the ‘bring-forward rule’²) could save your non-tax dependents $61,200 in tax after you die.

Even greater tax savings could be made if you also contribute to your spouse’s super and/or make ‘downsizer’ super contributions. Your financial adviser can explore these and other options which may help reduce tax for your beneficiaries.

Benefits for you and your spouse

There’re also some ways that recontributing super could benefit you and your spouse while you're still alive. For example, taking money out of your super and putting it into your spouse’s super (or the other way around) may help you to:

• keep your ‘total super balances’³ within the limits needed to make additional super contributions, and
• even up your super accounts so you can transfer⁴ more into tax-free retirement pensions as a couple.

Seek advice

Recontributing super can be effective, but it’s not available or suitable for everyone. The information in this article is general in nature and doesn’t consider your personal circumstances. A financial adviser can:

• check if you’re eligible to access your super and put the money back in
• determine whether the strategy suits your broader retirement and estate planning goals
• take into account any costs, including transaction fees, lost earnings from time out of the market and any tax your super fund has to pay on realised capital gains, and
• ensure you complete the necessary steps and procedures.

¹ Includes 2% Medicare levy and assumes the payment of taxable (taxed) is made directly to a non-tax dependent. The Medicare levy
isn’t payable if the death benefit is paid to a non-tax dependent via the estate.
² The ‘bring-forward rule’ allows you to make up to three years’ worth of non-concessional (after-tax) contributions to superannuation
in a single financial year, rather than being limited by the annual cap. Conditions apply. See ato.gov.au for more information.
³ Your ‘total superannuation balance’ includes all of your super accumulation interests, amounts held in superannuation income streams and certain other amounts. See ato.gov.au for more information and my.gov.au to access your total super balance.
⁴ There’s a limit on how much you can transfer into the retirement phase of superannuation. It’s known as the ‘transfer balance cap’ and is generally up to $2 million depending on your circumstances. See ato.gov.au for more information and my.gov.au to access your transfer balance cap.