Here’s How To Increase The Tax-Free Component of Your Super funds

05/05/2015 by Dominique Schuh

THE withdrawal and re-contribution strategy is still worthwhile. This strategy aims to increase the tax free component of a superannuation sum by withdrawing the taxable component, then re- contributing this amount back into the fund as a non-concessional contribution, and in so doing increase the tax free component of the member's funds.
This was very popular prior to 30 June 2007 when the laws changed to make a pension paid from a super fund generally tax free to those aged over 60 years.
However, this strategy is still very important for those less than 60 as they will still pay some tax on their pension withdrawals or on lump sums above the thresholds (currently $170,000) on their taxable component.
There is also an estate planning issue for those over 60 given the ultimate recipient of a lump sum benefit is often a non dependant, such as an adult child, for income tax purposes. This is because non-dependants generally pay tax on the taxable component of a lump sum death benefit.
Also potential future legislative changes cannot be ignored – it is always a good defensive strategy for superannuation interests to be "non taxable".

Our office will be contacting our SMSF clients whom we think may benefit from this strategy. However, if you have an industry / government or retail super fund that you're not sure of, please contact us for a free review of this.
You can discuss all of your Super issues with Dominique Schuh on 5482 2855.