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Avoidance Not Evasion

Last week I posted a gripe about the “doubling up” with a second 15% tax on superannuation balances when cashed in by anyone except the member, or on his/her death, by a spouse or dependent.

In its simplest form every superannuation account has the capacity to receive contributions which are taxed at 15% (going in) while un-deducted contributions are tax free in the hands of the super fund.

On the death of the member a further tax of 15% is levied if the money goes into the hands of anyone except a spouse or a dependent under the age of 18.

There is a technique for minimizing this tax which is definitely NOT evasion. This is the “re-contribution” strategy which is useful but not perfect and is only available over a limited number of years. It simply involves withdrawing from the super fund (which is automatically a mixture of taxed and untaxed) and placing those funds back as an un-deducted (i.e. untaxed) contribution.

Talk to your advisor and see if this strategy will work for you. It simply means you have to be part of the age group where you can still contribute and ALSO part of the age group where you can withdraw from your super fund.