Super Snapshot – June 2014

Clear Vision • June 3, 2014

This month we will expand on our age-based super strategies series by discussing the ‘withdrawal and re-contribution strategy’. This strategy is available for SMSF members who are over 60 and is a particularly useful tool for estate planning.

Cheers
Justin

 
Recently we featured a Super Snap Shot article in regards to different types of contributions. Here’s a quick recap:  Concessional contributions are contributions which are made from pre tax money . When you make a concessional contribution to your fund, the fund pays tax on this amount at a rate of 15%. Consequently the contributor (usually your employer or in some instances, you personally) can claim this amount as a deduction. Concessional contributions include: Superannuation Guarantee Contributions (that is, the 9.25% paid by your employer), salary sacrifice contributions and certain types of personal contributions. Non concessional contributions: are contributions made from post tax money . These contributions are not taxed when they are received by the superannuation fund as they have already been taxed in your hands. 

The type of contribution made is very important as this will govern how the money is held in the superannuation fund and ultimately, the taxation treatment when the money is paid out. Concessional contributions (pre tax contributions) will add to your taxable component. Non concessional contributions (post tax contributions) will add to your tax free component.

Example:
Terry is 62 and is the sole member of her superannuation fund. Terry is a widower and has 2 adult children who will receive all of Terry’s superannuation balance when she passes away. Terry works 3 days a week for her company Tex Pty Ltd. Tex Pty Ltd pays Terry an employer contribution of $25,000 in the 2014 financial year. Terry also makes a non concessional (post tax) contribution from her personal money of $5,000. Terry’s $25,000 employer contribution will increase her taxable component, Terry’s $5,000 non concessional contribution will increase her tax free component.

Pension Commencement

Once an income stream has been commenced the proportion of taxable and tax free balance on the start date of the income stream are locked in and will not change for the life of that income stream.  When you begin to draw down on your income stream, the money coming out of the fund is made up of taxable and tax free components in proportion. (e.g. if the Fund has 70% taxable balance, each payment will be made of 70% taxable money).For members over the age of 60, the taxable vs. tax free proportions do not have a direct tax effect as ALL withdrawals are tax free. There is however, an indirect effect and this arises when Terry passes away. Upon death, Terry’s two adult children are non-dependant beneficiaries for tax purposes and therefore are liable to pay tax on the taxable component of Terry’s superannuation balance.

The Withdrawal and Re-Contribution Strategy

Using the withdrawal and re-contribution strategy, Terry’s taxable and tax free balances can be ‘refreshed’ so that her beneficiaries don’t receive an unexpected tax bill with their inheritance. A withdrawal, re-contribution strategy cycles money out of the superannuation fund as a income stream payment and then immediately deposits it back in again as  a non concessional contribution. A new income stream is immediately started on the non concessional contribution on the date of deposit to isolate this money and lock in the 100% tax free status. Because the money is deposited as a non concessional contribution, no tax is payable by the Fund and because the member is over the age of 60 at the time of withdrawal, no tax is payable by the member. In addition, neither party is better or worse off as the money ends up where it started – the benefit will be to any adult beneficiaries of your superannuation benefits when you pass away.

Trustees should note, while the actual process may appear simple enough, throughout this process, care needs to be taken in regards to optimum timing, maximum withdrawal limits, non concessional contribution caps and eligibility to make contributions as well as preparation of new pension documentation. Please do not attempt this strategy without contacting us. Harsh penalties can be imposed by the ATO for exceeding contribution caps or early access to superannuation balances including taxes of up to 93%! We will not only ensure that this strategy is right for your situation but also guide you through the process to ensure everything is conducted in accordance with tax and superannuation legislation.

If you are interested in the above strategy or would like to discuss how your superannuation can work harder for you please contact our office on 07 4688 2500.

 

Capital Gains Tax Implications of Subdividing Land in Australia

By Caroline Gillies • June 1, 2025
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Autumn Tax Tips: Make the Most of the Final Weeks Before Year-End

By Caroline Gillies • May 25, 2025
As we step into the final week of autumn and feel winter’s chill approaching, it’s a natural time for reflection—and that includes taking stock of your financial and tax situation. The end of the year is closer than it seems, and a bit of preparation now can make a significant difference come tax season. Here are a few things to consider as the leaves fall: 1. Review Your Income and Deductions This is a good moment to check your income year-to-date and consider whether there are any deductions you can still take advantage of. Charitable donations or investment losses might help reduce your taxable income before year-end. 2. Maximise Super Concessional Contributions If you haven’t yet maxed out your superannuation concessional contributions, there’s still time. Remember unused cap amounts carry forward for 5 years and the 2019-20 unused cap amount will expire 30 June 2025. These contributions not only help secure your future but can also offer tax benefits now. 3. Organise Your Records Autumn’s slower pace is perfect for pulling together receipts, invoices, and financial documents. Getting organised now means less stress later when tax season begins in earnest. 4. Consider Tax-Loss Harvesting If you’ve had investments that underperformed, selling them before the end of the year to offset gains can be a strategic move. Consult with us today to see if this makes sense for you. 5. Plan Ahead Winter may bring holidays and downtime, but it's also a good window to consult with a tax professional. A quick meeting before year-end can reveal savings opportunities or help avoid surprises when you file. So, as the days grow shorter and frost begins to settle in, use this time to bring clarity and warmth to your finances.

Have you Thought About Where Your Business Will Be in 5 Years?

By Caroline Gillies • May 11, 2025
At Clear Vision Accountancy Group, we offer tailored services to support your long-term success—from strategic business planning to high-end tax administration. Whether you're aiming for growth, improved profitability, or a clearer direction, we're here to help you build a plan that gets results. If you're ready to map out the next five years with clarity and confidence, contact us today on (07) 4688 2500. Our 1-Page Business Plan will help you with: 1. Vision & Purpose Where are you headed, and why does it matter? What is the core purpose of your business? In five years, what positive impact will you have made on your customers, team, or community? What do you want your business to be recognised for within your industry? 2. Growth & Scale What does success look like, and how will you achieve it? What revenue, profit, or market position are you targeting? How many clients or customers do you want to serve—and in which markets? Are you planning to expand your offerings or enter new territories? 3. Team & Culture Who is helping you build it—and how? What does your ideal team look like in terms of structure, culture, and capabilities? How will you attract, retain, and develop top talent? What kind of leadership values and workplace environment will you foster? 4. Operations & Systems How will you deliver at scale—efficiently and reliably? What systems and workflows need to be in place to support sustainable growth? Which technologies or platforms will you implement to improve efficiency? How automated or streamlined do you want your business operations to become? 5. Brand & Customer Experience What do customers say about you—and why do they keep coming back? How will clients describe their experience with your business? What kind of reputation or brand presence will you be known for? What sets your business apart from the competition ?  Our Dream it. Plan it. Get it! will help you with: 1. Lifestyle & Personal Goals How does your business support the life you want to live? What level of involvement do you want in the day-to-day operations? What does ideal work-life balance look like for you? What personal or financial goals will your business help you achieve?