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The benefits of using a re-contribution strategy

A re-contribution strategy involves withdrawing your superannuation and re-contributing it back into the fund as a non-concessional (after-tax) contribution.

It is an easy strategy to implement and can provide significant tax savings for a trustee and their family in the future. This is because the strategy converts the taxable portion of the withdrawn super amount into tax-free components, therefore reducing the amount of tax payable when the person’s superannuation is passed onto their beneficiaries when they pass away.

However, this strategy is only available to those who have met a condition of release to access their superannuation and are eligible to make a contribution back into their superannuation.

The strategy is most beneficial for those who are 60 years of age. This is because the strategy involves withdrawing a lump sum and paying any necessary tax on the withdrawal, and those who are aged 60 years or over generally do not have to pay tax on lump sum withdrawals they make from super.

Before implementing the re-contribution strategy, individuals should consider whether the strategy will be worthwhile in the long run. Those who are under the age of 60 wanting to use the strategy will not be able to withdraw their total superannuation balance tax-free. Those who have also triggered the bring-forward rule in the financial year they wish to use the strategy may also be at risk of paying more ‘excess contributions tax’.

As with most superannuation strategies, seeking professional financial advice may be best before implementing the re-contribution strategy.

Posted on 15 November '16 by , under Super.

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What to consider when consolidating your super

The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds' policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

  • Exit fees
  • Insurance policies
  • Investment options
  • Ongoing service fees
  • Performance of the funds

Check employer contributions
Changing funds may affect how much your employer contributes, as some employers contribute more to certain funds. Check your current accounts to see if changing funds will affect this. Once you have selected a super fund, regardless of whether you choose a new super fund or one of your existing ones, provide your employer with the details they need to pay super into your selected account.

Gather the relevant information
When consolidating your super, you will need to have the following details ready:

  • Your tax file number.
  • Proof of identity. This could include your driver's license, birth certificate or passport.
  • Your fund's superannuation product identification number (SPIN).
  • Your fund's unique superannuation identifier (USI).
  • Details of your previous fund.

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