What is a super re-contribution strategy and who needs one? FAQs

Sep 17, 2023 | Financial coaching, Superannuation

Below is a summary of a set of common frequently asked questions (FAQs) in relation to superannuation re-contribution. 

What is it?

Superannuation re-contribution refers to withdrawing money from your superannuation account and contributing it back into either your fund or your spouse’s fund.

Why would you do this?

Before we consider this let’s look at how your superannuation balance is comprised. There are tax components that make up the total value and they are:

  • Tax-free: Generally made up of non-concessional or after-tax contributions
  • Taxable – taxed: made up of salary sacrifice or personal tax deductible contributions, employer super guarantee contributions and investment earnings on contributions
  • Taxable – untaxed: Amounts where the fund has not paid any tax on the contributions or earnings. Often found in defined benefit super schemes

Tax-free components are always received tax-free whilst there are tax implications for the taxable component depending on who the recipient is.

Tax dependants

There is a difference in being a dependant and non-dependant for tax purposes and dependants include spouses, children under 18 and people with whom there is an interdependency relationship. Non-tax dependants are those who do not fit into the dependant definition.

Tax dependants will receive your super tax-free whilst non-tax dependants are subject to different rules.

How does withdrawing and contributing back to super help?

By withdrawing money and then contributing back to super you can increase the tax-free component of your superannuation. This means any non-tax dependants won’t have as much tax to pay on receipt of your superannuation.

You can’t choose which component to draw funds from i.e. you can’t say please withdraw $200,000 from my super account and I want it to be form the taxable component. The withdrawal is performed proportionally so if you have 20% tax-free and 80% taxable and withdraw $100,000 then $20,000 will be tax-free and $80,000 taxable.

There are also limits on what you can contribute to superannuation and the non-concessional cap is $110,000 although you can bring forward two future years (depending on your total super balance) and contribute $330,000. You can also do $110,000 in the June of a financial year and $330,000 in the July.

Care needs to be taken to make sure you stay within caps.

Why contribute to your spouse?

Contributing monies to a spouse’s account can help where:

  • One spouse is over the transfer balance cap (currently $1.9m) and one is well under. The transfer balance cap limits the amount that you can transfer to the tax effective pension phase of super. You can increase the combined amount of pension monies by moving a sum from one spouse to another.
  • When there is an age difference between spouses you can increase age pension payments by moving superannuation from the elder to the younger spouse. Superannuation whilst in accumulation phase is not assessed by Centrelink until the person reaches age pension age whilst money in pension phase will be assessed.

Does this help me?

It can help if your balance or your spouses is over the transfer balance cap and the other balance is under as this will increase the combined amount you can commence pensions with.

From a tax viewpoint there is no benefit for you or your spouse.

Case Study

Gary is 63 and has retired and has $500,000 in superannuation. This is made up of $50,000 tax-free and $450,000 taxable. If Gary withdraws $330,000 he can add this to a new accumulation account and this will be all tax-free. His other accumulation account will have $170,000 in it and the components and tax implications will look as follows:


Tax-free: $50,000 (10%)

Taxable: $450,000 (90%)

Tax to non-tax dependants: up to 17% of taxable component or $76,500

Withdraw $330,000 – this is withdrawn proportionally so the $330,000 will be $33,000 tax-free 910%) and $297,000 taxable (90%).


Super account 1: $330,000 all tax-free

Super account 2: $170,000 which will be  $17,000 tax-free (10%) and $153,000 taxable (90%).

Tax to non-tax dependants: up to 17% of taxable component or $26,010

The $330,000 figure is significant as the maximum non-concessional or post-tax contribution is $110,000 each financial year or you can bring forward two future years when under 75. This means you can contribute $330,000 in one financial year and nothing further for the next two financial years.

Gary could then commence two pensions and potentially draw the minimum amount from the tax-free pension and whatever was required to meet income needs from the pension with taxable components. After two financial years a further withdrawal and contribution could be arranged.

I am here to support you and advice on your unique situation. Please note that this is not financial advice. There are a lot of considerations to take into account and eligibility rules involved in doing this and a discussion with a financial adviser would be prudent. If you are over 65 or have a spouse who is, I would strongly recommend you book in for a chat to explore if re-contribution may be applicable for you in your situation.  

Learn more about super re-contribution in the below blog.

The financial benefits of considering a super re-contribution strategy

About the author

Simon Duigan is an Independent Financial Advisor and owner of Core Independent Financial Advice (Core IFA). Core IFA is 100% independent and receives no commissions or benefits from any product providers or financial institutions.. Instead, you can be confident that Core IFA have your best interests at heart.


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