In this guide
If you have heard a super recontribution strategy may be worth considering but wondered what it was, the name says it all – you withdraw some of the savings from your super account and then recontribute them back into the super system.
Which raises an obvious question. Why take money out of super and then put it straight back in again?
Like many things to do with super, it’s all about the tax benefits that could be gained from using this strategy.
How a recontribution strategy works
Implementing a recontribution strategy simply involves withdrawing a lump sum from your super account and then recontributing the money back into your, or your spouse’s, super account as a non-concessional (after-tax) contribution, downsizer contribution, or a mix of both.
To be eligible to make a lump sum withdrawal you generally need to have turned 60 and retired, left a job after your 60th birthday, or reached age 65. Withdrawals are tax-free when you are 60 or older, except if you are a member of an untaxed super fund.
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Making a withdrawal followed by a non-concessional or downsizer contribution converts any taxable components you withdrew into a tax-free component. You may be asking why this matters if your withdrawals are already tax fee, and the answer is that tax-free components are passed on without tax after you pass away, while taxable components attract at least 15% tax when paid to beneficiaries that are not tax dependants (including adult children).
Using your withdrawal to contribute to your spouse’s account could also help you keep your individual balances below the $2 million transfer balance cap or the pending $3 million limit above which your balance will begin to attract additional tax.
For an example of how a recontribution strategy can be used, check out our detailed case study.
Understanding your super benefits
When trying to get your head around how a recontribution strategy works, it’s important to realise that the money in your super account is classified into separate components:
1. Tax-free components
The tax-free component of your super is generally the contributions on which you have already paid tax (non-concessional contributions). Some older components including pre-July 1983 benefits were also converted into tax-free component when the current system was introduced in 2007.
The tax-free component is always released from super tax free, regardless of your age when you take your super benefit, or who you leave your benefits to when you die.
2. Taxable components
The taxable components are the concessional contributions (such as Super Guarantee and salary-sacrifice contributions) held in your super, plus all the accumulated investment returns on your savings. This is divided into:
- Taxable component – taxed element
- Taxable component – untaxed element (this only occurs in untaxed super funds such as SuperSA’s – TripleS scheme and West State Super).
Your taxable component is calculated as follows:
Total super account balance – tax-free component
= Taxable component
The proportioning rule
Whenever money is paid out of your super, the payment is made in the same proportions of tax-free and taxable component as your total balance.
For example, if your super account has an 80% taxable component and 20% tax-free component, any withdrawal will consist of 80% taxable component and 20% tax-free component. Withdrawals cannot be made from only one component of your account.
When you make your recontribution, you can consider keeping it in a separate account so that it is not mixed with taxable components. Keeping your components separate can be useful for two reasons:
- You can make future withdrawals from your original account without being forced to withdraw any of the tax-free component you have just created (you may then proceed to recontribute those additional funds to the account you’re using to hold tax-free components if you wish)
- You can choose who to nominate as the beneficiary of each account. Beneficiaries who would pay tax on taxable components of inherited super death benefits can be nominated to receive the account holding the tax-free component.
Importantly, future investment growth will be added to the taxable component when an account is held in the accumulation phase. Starting a retirement income stream (pension) will however freeze the taxable and tax-free proportions. For example, if a pension is started with a balance that is 100% tax-free, the pension will remain 100% tax-free component.
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When can a recontribution strategy help?
There are three situations when a recontribution strategy can be particularly valuable:
1. Estate planning
For many people, super benefits are ultimately left to adult children or other relatives after both partners pass away. While your spouse can inherit your super (including taxable components) tax free, adult children and others generally can’t because they are not dependants according to tax law (tax dependants).
Using a recontribution strategy to increase the tax-free component and reduce the taxable component of your super benefit can cut – or even eliminate – the tax payable by your non-tax dependant beneficiaries, so they receive a larger benefit.
Beneficiaries who are not tax dependants pay no tax or Medicare Levy on tax-free components, while the relevant tax rates are 15% for the taxable-taxed element, and 30% for any taxable-untaxed element. Medicare Levy applies in addition to these rates for taxable components when benefits are paid directly to beneficiaries from a super fund but does not apply when the funds are paid into your estate to be distributed according to your will.
2. Utilising both spouses’ transfer balance caps
When you retire and start withdrawing your super, there is a limit to how much you can transfer from your accumulation account into a retirement phase pension account, where future investment earnings are tax free. This is called the Transfer Balance Cap and is currently set at $2 million (in 2025-26).
If you have more than the cap in super and your spouse has less, withdrawing money from your account and recontributing it into your spouse’s will increase the amount you (together) can transfer into the tax-free retirement phase.
3. Moving super to a younger spouse to improve Age Pension
If you and your spouse are not the same age, holding super in the younger person’s name can improve the Age Pension rate paid to the older partner once they turn 67.
This occurs becuase superannuation invested in a super account in the accumulation phase is not assessed in Centrelink’s means tests until the account’s owner reaches Age Pension age (67).
Money withdrawn from the older partner’s super account can be re-contributed into the younger person’s super to prevent it being assessed.
Am I eligible to use a recontribution strategy?
To implement a recontribution strategy with your existing super benefits, you must be eligible to withdraw a lump sum from your super and you also need to be able to recontribute the money back into the super system. This usually means you are:
- Aged 60 to 74 so you are eligible to both withdraw from your super account and make contributions, or if you’re aged 75+ you are eligible to make a downsizer contribution
- Retired or have met another condition of release to access your super benefit, such as leaving a job after turning 60, or turning 65.
Recontribution strategy calculator
If you are confused about whether the recontribution strategy may work for you, use our calculator below.
Important points to consider before using a recontribution strategy
If a recontribution strategy sounds like it could help you achieve your retirement or estate planning goals, there are some important points to bear in mind before taking the leap:
- Any recontributions you make into your – or your spouse’s – super account are subject to the normal contribution rules and caps. Learn more about making superannuation contributions.
- If you are turning 75, the recontributed amount must be received by your super fund no later than 28 days after the end of the month in which you turn 75 (except for downsizer contributions).
- Check your total super balance (TSB) before using a recontribution strategy. You can access the details via MyGov using the ATO linked service. Your TSB must be under the transfer balance cap ($2 million in 2025–26) on the most recent 30 June to be eligible to make any non-concessional contributions in the current financial year. If you are unable to make non-concessional contributions, the strategy will not be available to you in the current year unless you are eligible to make a downsizer contribution. You could consider withdrawing enough to bring your total super balance below the cap and make non-concessional contributions possible in the following financial year.
- You may have to pay transaction costs – such as a buy/sell spread or capital gains tax (CGT) – on any investments your super fund must sell to pay for your withdrawal and recontribution.
- You may need professional advice to implement this type of strategy, as it can be complex to calculate the most effective amount to withdraw and recontribute into your, or your spouse’s, super account. For example, you need to take into account contribution caps and the time you have available to recontribute before turning 75.
- If you have previously triggered a bring-forward arrangement that has not yet ended, you may not be able to recontribute the money back into your super without exceeding your personal non-concessional contributions cap.
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