This superannuation recontribution strategy calculator allows you to calculate the benefits of a recontribution strategy.

Specifically, this recontribution calculator shows how the taxable and tax-free components are affected by the strategy.

The benefits of a super recontribution strategy include a reduction in potential death benefits tax, reduction in pension income tax for under 55s and a protection against potential changes to tax and super legislation.

A superannuation recontribution strategy can only be done by an individual who has met a superannuation condition of release.
 

Superannuation Recontribution Strategy Calculator

 


 

Recontribution Strategy Definition

 
The definition of a recontribution strategy is the act of withdrawing some or all of a superannuation or pension balance and recontributing it back into super as a non-concessional contribution, with the effect of increasing the tax-free component and decreasing the taxable component.
 

Super Recontribution Strategy Benefits

 
The benefits of a super recontribution strategy include:

Benefit Description
Reduce death benefits tax Reducing the taxable component can reduce potential death benefits if a residual super or pension balance is paid to a non-tax dependant in the event of the member's death
Reduce pension income tax Using the low rate cap amount – a person under 55 can perform a recontribution strategy which can reduce tax on pension income should they subsequently commence a pension
Protect against legislative change Reducing the taxable component can protect against potential changes to legislation whereby people over age 60 could be once again taxed on withdrawals

Use this calculator to calculate potential death benefits tax based on your current super or pension balance.

Recontribution Strategy Example

 
The super recontribution strategy example below details how a cash out and recontribution strategy can reduce the taxable component and increase the tax free component.

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Recontribution Strategy Example

 
Sally, aged 62, is retired. Sally has a superannuation accumulation balance of $500,000. Of this, $100,000 is a tax-free component and $400,000 is the taxable component.

Sally has not made any non-concessional contributions in the current financial year and has not triggered the bring-forward rule in the previous two financial years.

She makes a lump sum withdrawal from her accumulation account of $300,000.

The lump sum withdrawal must be proportionate from each component. Therefore, $60,000 tax-free and $240,000 taxable.

This withdrawal is tax-free, as she is over age 60.

Sally then immediately contributes the $300,000 back into her superannuation accumulation account as a non-concessional contribution, using the ‘bring-forward‘ rule.

The benefit of the recontribution strategy is as follows:

Before Recontribution After Recontribution
Tax-Free Component $100 000 $340 000
Taxable Component $400 000 $160 000
Total $500 000 $500 000
Reduction in potential death benefits tax $27 000

The reduction in the potential death benefits tax is calculated as 15% of the difference between the before/after taxable component.

Death benefits tax is payable when the taxable component of a superannuation or pension balance is paid to a non-tax dependant at a rate of 15% (plus Medicare Levy).

Use the superannuation recontribution strategy calculator, above, to calculate the benefits of a super recontribution strategy based on your account balance.
 

Pension Refresh Strategy

 
A pension refresh strategy involves rolling a superannuation pension back to accumulation phase to pick-up accumulation savings and then commencing a new pension with the consolidated amount.

Contributions cannot be made directly to a pension account. Contributions can only be made to an accumulation account.

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Rolling a pension back to accumulation to pick-up additional savings and then recommencing a new pension can allow more wealth to be held in tax-free pension phase.

When implementing a pension refresh strategy, you need to mindful of the Transfer Balance Cap, which allows no more than $1.6 million (indexed) to be transferred into an account based pension.

Exceeding the Transfer Balance Cap can result in Excess Transfer Balance Tax on notional earnings.

Another important thing to consider with a pension refresh strategy is to ensure that you are aware of the implications of refreshing a grandfathered pension.

Refreshing a grandfathered pension will cause the previously grandfathered pension to no longer be grandfathered.

Feel free to comment below if you have any questions relating to the superannuation recontribution strategy calculator.

Chris Strano

Chris Strano is a specialist independent superannuation author for SuperGuy.com.au - one of Australia's leading superannuation information resources.

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