Super Withdrawal and Re-contribution Strategy

Are you approaching retirement and wondering when you can withdraw your superannuation funds (also known as, ‘super’?

Withdrawing Your Superannuation Funds

You can withdraw your superannuation funds:

Superannuation Withdrawal Options

You can receive your super as a super income stream, super lump sum or a combination of both. Check with your fund to find out what options are available to you.

The super withdrawal option that you choose may affect the amount of tax you pay and the amount of money you have for your retirement.

Super Income Stream

You receive a super income stream as a series of regular payments from your super fund (paid at least annually). The payments must be made over an identifiable period of time and meet the minimum annual payments for super income streams.

Super income streams are a popular investment choice for retirees because they help you manage your income and spending. Super income streams are sometimes called pensions or annuities.

Your super income stream may be either:

  • an account-based super income stream
  • a non-account-based super income stream.

Your super income stream will stop:

  • when there is no money left in your super account
  • minimum annual payment is not made
  • commutation (when you convert a super income stream into a super lump sum)
  • when you die, unless you have a dependant beneficiary who is automatically entitled to receive the income stream.

Super Lump Sum

If your super fund allows it, you may be able to withdraw some or all your super in a single payment. This payment is called a ‘lump sum’.

You may be able to withdraw your super in several lump sums. However, if you ask your fund to set up regular payments from your super it is considered an income stream.

If you take a lump sum out of your super, the money is no longer considered to be super. If you invest the money, the money that you earn on those investments will not be taxed as super and may need to be declared in your tax return.

Tax Tip:

The superannuation withdrawal and re-contribution strategy involves the withdrawal of superannuation funds and the re-contribution of the superannuation funds back to the same fund.

The superannuation withdrawal can only be done if the member has met a condition of release, such as retiring or turning 65. Superannuation withdrawals by members over the age of 60 are generally tax free. The funds withdrawn have normally been allocated to a ‘taxable’ component as it is comprised of taxable super contributions and fund earnings.

If the member dies and their superannuation balance is paid out to an adult child, the ‘taxable’ super component will be taxed at 17%. The benefit of this strategy is that the re-contributed super turns into a ‘tax free’ component in the fund. As such, if the member dies their superannuation balance can be paid to adult children tax free (thereby saving 17% tax).

 

Fortiz Accountants is one of the few accounting firms which is licensed to provide advice on superannuation and SMSF (AFSL No. 483940). Contact us today for assistance with your SMSF tax returns and tax advice!

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