Making the Most of Your Super: A Smart Way to Leave More Behind
When it comes to superannuation, most people focus on using it to fund their retirement. But there’s another powerful way to make the most of it - one that can also help your family in the future. It’s called the recontribution strategy.
What Is a Recontribution Strategy?
A recontribution strategy involves withdrawing part of your super once you’ve reached a condition of release (for example, after age 60 and retired) and then contributing that money back into super as a non-concessional (after-tax) contribution.
While it may sound like you’re simply taking money out and putting it back in, the result can be a meaningful tax saving. This strategy helps convert part of your balance from taxable to tax-free, which can reduce the tax paid by your adult children if they inherit your super one day.
Case Study: How We Helped Paul and Lily Keep More in the Family (fictional names)
Paul, 66, and Lily, 62, are long-time clients who recently retired and wanted to make sure their wealth was structured wisely for the next generation. Together, they had $1.2 million in super, mostly in the taxable component, and wanted their children, Sarah and Ben, to receive as much as possible from their estate.
During a recent review meeting we discussed their goals and estate planning options. We identified that a recontribution strategy could reduce the tax their children would pay in the future.
We helped Paul and Lily each withdrew $360,000 from their super and recontribute it as after-tax contributions using the bring-forward rule.
By doing this, they shifted $720,000 of their total balance into the tax-free component. If their balances stay similar, this simple move could save Sarah and Ben more than $120,000 in tax, leaving more of their parents’ hard-earned savings in the family.Other Benefits of Recontribution
Aside from estate planning, this strategy can also help couples:
Balance super accounts t
Improve Age Pension outcomes if one partner is under age 67
Things to Keep in Mind
Before implementing this strategy, it’s important to ensure:
You’ve met a condition of release (such as being over 60 and retired)
You’re eligible to contribute within the contribution caps ($120,000 per year or $360,000 using the bring-forward rule)
All transactions are handled correctly, particularly if you manage an SMSF
Your beneficiary nominations are current
How We Can Help
A recontribution strategy can be a smart way to protect your family’s future and make your wealth work harder. We’ll help you review your eligibility, calculate the potential savings, and coordinate with your accountant or solicitor to ensure your plan is executed correctly.
📞 If you’d like to explore how a recontribution strategy could fit into your retirement and estate planning, reach out to our team - we’d be happy to help.
Your Vision Financial Solutions Pty Ltd ABN 64 650 296 478 and its Advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This article has been prepared without taking into account your personal objectives, financial situation or needs.