Save tax in Retirement with the Superannuation Recontribution Strategy*
One of the most popular pre-retirement strategies is the recontribution strategy. This involves the withdrawal of a portion of your super as a lump sum, paying any taxes, then recontributing the balance back to super. This boosts the amount of future tax free undeducted withdrawals and tax free pension components (known as the deductible amount).
The strategy works because for super taken as a lump sum, the first $135,590 of the post June 1983 portion is tax free for those over 55 for the 2006/07 financial year. Withdrawals over this threshold will generally not be cost effective or involve a lengthy pay-off period unless they are from the undeducted component.
The strategy may be useful for:
- A person intending to cash out their super
- A person about to commence a retirement income stream such as an allocated pension as it leads to a higher after tax pension.
*BUDGET 06 UPDATEIt is proposed that both lump sums and pensions paid from a taxed superannuation fund will be tax free to the recipients aged 60 years or more after 1 July 2007. Such a removal of taxation on benefits would make a superannuation recontribution strategy largely redundant should you be planning on taking your superannuation benefit from a taxed fund as a pension or a lump sum after 1 July 2007 and you will be aged 60 or over. However, a recontribution strategy may still be advantageous for other reasons. If you are in this age bracket we suggest that you click here to contact us to discuss your personal situation.
If you would like more information on the superannuation recontribution strategy or would like to speak to a financial planner to learn just how you could benefit from this strategy simply follow this link: Enquiries Desk and mention "Superannuation Recontribution Strategy".
Source: Personal Wealth
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