Superannuation

This is a process where upon meeting a condition of release, a member withdraws money from their super fund and then re-contributes the funds back into their super fund as a personal non-concessional contribution (subject to restrictions with non-concessional caps). The aim of this strategy is to increase the tax-free portion of the members super fund benefit and convert a taxable amount into a tax-free amount.  The strategy will be particularly beneficial for reducing tax where a member is under 60 years of age, and therefore will be subject to tax on any amounts withdrawn from super, or where the super funds are paid upon death of a member to a non-tax dependant who will be subject to tax on receipt of a taxable amount. With the introduction of a Transfer Balance Cap limiting how much can be held in a pension account, this might also be a valuable strategy for transferring funds between members of a couple where one member exceeds or is close to exceeding their individual personal Transfer Balance Cap threshold. The strategy of withdrawing and re-contributing funds can be used to transfer funds from the member of a couple close to their transfer balance cap to the other member of the couple with a low super balance thereby maximising the combined amount of funds able to be held in pension phase by the couple. (Please note: The general Transfer Balance Cap is currently set at $1.9 million for the 2024-25 financial year.)

This strategy must be planned carefully as:

• you must be eligible to make the withdrawal from super;
• you (or your spouse) must be eligible to re-contribute the funds back into superannuation subject to contribution caps and age-based restrictions;
• you may be required to pay tax on the amount withdrawn if you are aged under 60 years of age.