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Super and estate planning

Recontribution strategy

Section: 14.16

A recontribution strategy seeks to increase the tax-free portion of a client's superannuation interest just prior to commencing a superannuation income stream. Subject to a client meeting a condition of release with nil cashing restrictions (eg permanent retirement after attaining preservation age), they withdraw a tax-free lump sum from their super interest. The lump sum is then redirected back into super as a non-concessional contribution, and an income stream is then commenced.

The purpose of a recontribution strategy is to replace the funds being withdrawn (which consist, partially or fully, of a taxable component) with a tax-free component. From an estate planning perspective a recontribution strategy can minimise the taxable component of any benefit paid on death. This could result in a significant tax saving where a client's superannuation death benefit will be paid to a non-dependant for tax purposes (eg an adult child).

Last modified: Thursday, January 11, 2018