At the end of June, regulations came into force allowing people aged 65 and 66 to make voluntary concessional and non-concessional contributions without meeting the work test, and allow people up to age 75 to receive spouse contributions.

The other measure to allow people aged 65 and 66 to make up to three years of non-concessional contributions under the bring-forward rule is yet to be passed by the Senate.

SuperConcepts SMSF technical specialist Anthony Cullen explained that while the age at which the work test starts to apply has increased to 67, the conditions of release have remained at age 65 which opens up opportunities for recontribution strategies, particularly if the bring-forward measure is passed.

Speaking in a SuperConcepts podcast, Mr Cullen said this may enable clients to even out balances between members which could help them to maximise their transfer balance cap.

“[For example], if you’ve got a couple and let’s say the wife has $2 million and the husband only has $1 million, potentially there’s an opportunity for the wife who reaches age 65 to draw money out of her fund, after meeting that condition of release, and potentially make a contribution to her spouse,” he said.

“By the time they get to the point where they want to start a pension, hopefully both of them are closer to that $1.6 million transfer balance cap.”

Recontribution strategies could also be effective, he said, as an estate planning and “future-proofing” tool.

“The government is always tinkering with superannuation, so we never know what’s going to happen with the law, so if we have an opportunity to take out predominantly taxable components from our fund and then recontribute them as tax-free components, that may provide some future-proofing against legislative changes,” he said.

“From an estate planning point of view, when your money gets to the point where it’s flowing through to your adult children, your adult children will be paying a death tax on the taxable components, and so, if we can change those taxable components while we’re alive to tax-free components that your children will not be paying tax on, then that provides some estate planning opportunities.”

Miranda Brownlee
25 September 2020
smsfadviser.com