IT'S WISE to have a recontribution strategy.
This means simply withdrawing your superannuation benefits and then putting them back into the super fund as a taxation measure.
Implementing a recontribution strategy converts the taxable portion of your superannuation benefits into tax-free components.
Ultimately, this results in a reduction of the potential tax payable when your super is passed onto your beneficiaries following your death.
But it can only be implemented if you are able to meet a condition of release to access your superannuation benefits and also be eligible to make a contribution back into your fund.
The strategy is effective for the tax savings.
A recontribution is beneficial for those aged between the general preservation age of 55 years and age 60, expecting to receive a superannuation income stream.
You will not pay tax on the tax free portion of your superannuation income but the taxable component will be taxed at marginal rates - less a 15% tax offset.
The strategy helps with estate planning.
It can also be utilised where there is some likelihood that your superannuation benefits will be inherited by those not considered to be dependants under superannuation law, such as adult children.
A recontribution can reduce the lump sum tax payable from death benefit proceeds, or in some cases, the adult beneficiaries will not be required to pay any tax at all.
It can also increase Centrelink benefits when you and your spouse are of different ages.
A good recontribution strategy is where monies are withdrawn from the older partner's account and contributed to the younger spouse.
The younger person retains their balance in the accumulation phase which is not counted for Centrelink purposes if they are under age pension age.
This can significantly boost the amount of age pension available, even if only for a few years.