How do I make a recontribution?

A recontribution strategy involves withdrawing a lump sum from superannuation and recontributing it as a non-concessional contribution to increase the tax-free portion of the balance. This guide covers how recontribution strategies work, as well as how to fill in the form to set up a recontribution strategy on a Netwealth account.

In this guide, we cover:

• What is a recontribution strategy?
• How does it work?
• Example
• How to complete the recontribution strategy form

What is a recontribution strategy?

A recontribution strategy is a useful tax strategy for superannuation — especially when planning for non-dependant beneficiaries (like adult children), or implementing Centrelink maximisation strategies. A recontribution strategy usually involves withdrawing a lump sum from super and recontributing it as a non-concessional (after-tax) contribution, which increases the tax-free portion of the member’s balance.

To implement this strategy and other recontribution strategies, you can use the recontribution strategy form.

Common uses for a recontribution strategy include:

• Reduce tax on death benefits to non-dependants,
• Increase the tax-free portion of a member’s balance,
• Centrelink maximisation strategies (rebalance super between spouses),
• Reducing assessable income, or
• Offsetting capital gains.

How does it work?

Here’s a high-level overview of how the strategy works using the recontribution strategy form.

1. Withdraw a lump sum from a Super Accelerator (Income Stream or Personal Super account).
2. Move the funds out of the superannuation environment. If the lump sum includes assets, or if the lump sum is being recontributed to a spouse, funds must be temporarily transferred to a Wealth Accelerator account. 
3. Recontribute the funds as a non-concessional contribution to a Super Accelerator Personal Super (accumulation) account by completing the wealth accelerator withdrawal form.
4. If Step 1 listed an Income Stream, the member may also:
   1. Start a new Income Stream, using the balance and existing Income Stream, along with all or part of the Personal Super account balance, or
   2. Start a second Income Stream, using all or part of the Personal Super account balance, sometimes used to avoid mixing of tax components.

Note:

• If Step 1 listed a Personal Super (accumulation) account, a transfer between accounts instruction will be required to commence any required Income Stream.
• Recontribution strategies can be undertaken for SMSF accounts by processing a withdrawal of cash or in-specie assets and recontributing the cash or assets.

Example

This example is for illustrative purposes only and does not take into account your personal circumstances. Actual outcomes may differ.

This example uses an account with $1,000,000 that has the below tax breakdown:

• Tax-free $100,000.00 (10%)
• Taxable $900,000.00 (90%)

Some clients choose to recontribute back into the same account, while other clients choose to separate the amounts between 2 super accounts. Two examples are provided below with this in mind.

Example 1: Recontribution into the same account

Withdrawing $360k back into this account then it changes the components as follows (ignoring all external factors like market movements etc):

First recontribution	Account 1
Tax-free	$424,000 (42.4%)
Taxable	$576,000 (57.6%)

 
Because only 90% of the original withdrawal was taxable, only $324k converts from taxable to tax-free. The other $36k was already tax-free, so there's no change in treatment of that component.

A further $360k recontribution in 3 years (once the bring forward date has passed), that recontribution converts 57.6% (~$207k) of the amount from taxable to tax-free (again this assumes no change in the balance over 3 years). The components now look like this:

Second recontribution	Account 1
Tax-free	$631,360 (63.136%)
Taxable	$368,640 (36.864%)

The tax proportions change with each recontribution, which can affect the overall tax treatment in the event that the account holder passes away.

Example 2: Recontribution into a separate account

A 2nd account is created, and the recontribution is separated from the original, after the first recontribution we're left with:

First recontribution	Account 1	Account 2
Tax-free	$64,000 (10%)	$360,000 (100%)
Taxable	$576,000 (90%)	$0.00 (0%)

Then in 3 years, a further $360k from Account 1 is recontributed to Account 2, 90% ($324k) is converted from taxable to tax-free.

Second recontribution	Account 1	Account 2
Tax-free	$28,000 (10%)	$720,000 (100%)
Taxable	$252,000 (90%)	$0.00 (0%)

The tax proportions remain the same in Account 1 while Account 2 remains 100% tax-free. In practice the percentages in both accounts may differ due to market movements over time.

Important checks before proceeding

• The member has satisfied a valid condition of release.
• The member is eligible to make contributions.
• Any 'Notice of Intent to claim a tax deduction' has been lodged prior to commencing the recontribution strategy or must specify on the 'recontribution form' if a tax deduction will be claimed on the recontributed funds.
• If the member is under age 60, tax may apply to the withdrawal — confirm whether the recontribution amount is gross or net of tax.

How to complete the recontribution strategy form

Step 1: Provide withdrawal account details

Provide the account details from which the lump sum withdrawal will be deducted.

• Most commonly a Super Accelerator (Income Stream), but can also be a Personal Super (accumulation) account.

Step 2: Recontribution amount and withdrawal instructions

Provide the total recontribution amount. This should match the full value of what you want withdrawn and recontributed as a non-concessional contribution.

• If you wish to withdraw the full balance, enter the approximate balance. Note, if the lump sum is made from an Income Stream, the required minimum Income Stream payments will be deducted before withdrawal.
• If you are under 60 and making a cash only withdrawal, there may be tax withheld, and you will have the option of selecting net or gross of tax in the following steps.

1. Choose net of tax if you want the recontributed amount to be exact.
2. Choose gross of tax if the recontribution will simply be whatever is left after tax is deducted from the lump sum withdrawal amount.

Step 3: Withdrawal type

Select if you want the lump sum withdrawal to be cash-only or if you would like to include assets. 

Cash-only

• Full cash withdrawal: Select only if the recontribution equals the entire account balance.
  • If the withdrawal is being made from a Income Stream: The account will be closed.
  • If the withdrawal is being made from a Personal Super: Account remains open to accept the recontribution if required.
  • All investments will be sold, and the cash will be withdrawn once settled.
• Partial cash withdrawal: Withdraw a specified amount. Account remains open.

Asset transfer (In-Specie) and/or cash

• Full in-specie & cash withdrawal: Withdraw all assets and any remaining cash
• Partial in-specie only: Withdraw specific investments (no cash)
• Partial in-specie & cash: Withdraw specified assets, and add cash to meet recontribution target

Important: The following is required for all asset transfers: 

• Provide an asset breakdown via Excel or add notes in Step 8
• A Wealth Accelerator account or application form is mandatory for all in-specie and third-party scenarios e.g. when recontributing to a spouses account.
• Market fluctuations may affect asset values — we’ll only transfer up to the nominated amount.

Step 4: Wealth Accelerator account details (if required)

A Wealth Accelerator account is required when:

• You’re withdrawing assets
• The recontribution is going to a spouse or third party in which case it needs to be transferred via a new or existing joint wealth accelerator account.

List an existing Wealth Accelerator account or the application ID for a new one. Please note, the Wealth Accelerator account must be held in the receiving member's name either jointly or solely. Visit the Knowledge Centre guide for how to open a Wealth Accelerator account.

Step 5: Receiving accumulation account

All recontributions must go into a Super Accelerator Personal Super (accumulation) account.

You can: 

• Use an existing account
• Open a new account (include application ID)
• Use the $1.00 transfer option (only available if withdrawing from an Income Stream and contributing to the same member). Note this option is not available for spousal/third-party contributions.

Important note: If the recontribution is coming from a wealth accelerator account you must complete a wealth accelerator withdrawal form to request the withdrawal from the wealth accelerator account.

Step 6: Tax deduction intention

Indicate whether you intend to claim a tax deduction as this must be lodged prior to Netwealth processing a withdrawal or transfer request, to ensure you can claim the full amount.  

• Tick, Yes if you intend to claim a deduction. Note, specify whether it applies to the account in Step 1 or Step 5.
• Tick, No if not claiming.

Netwealth will process any required withdrawal after we have received and processed the intended tax deduction. For more information on how to claim a tax deduction visit the Knowledge Centre guide.  

Step 7: Starting a new Income Stream (optional)

Only complete if: 

• Step 1 lists a Income Stream account, and
• You want to start a new Income Stream using the recontribution or remaining balance.

Note: if commencing from an accumulation account, a separate transfer between accounts instruction will be required to commence an Income Stream.

Step 7.1: Transfer amount

• Choose Full balance: Personal Super (Accumulation) account will be closed.
• Choose Partial amount: Leave a portion (minimum $10,000 must remain).

 Step 7.2: New Income Stream structure 

• Consolidate into one new Income Stream (recontribution + existing Income Stream balance).
• Create a second Income Stream (existing Income Stream remains active).

Step 7.3: Account settings 

• If creating a new separate Income Stream, authorise Netwealth to apply the account settings from the existing Income Stream account:
  • Payment frequency and amount
  • Bank account details
  • Reversionary beneficiaries
  • Advice fee structure (fixed term fees only).
• Note this section is not required, if you are consolidating into the one new Income Stream.
• For spouse/third party recontributions, use a Transfer Between Accounts form to establish a new Income Stream — this form cannot be used to start a Income Stream for another member.

 Step 8: Additional instructions

 Optional — use to:

•  Include in-specie breakdown
• Add clarifications or special handling notes.

Step 9 & 10: Sign the declaration

The form must be signed by: 

• The member (Step 9), or
• An authorised adviser representative (Step 10).

 Only one signature is required — not both.

Step 11: Submit the form

 Choose one of the following:

• Advisers: Login to Netwealth, and upload the completed form by navigating to 
  Activities & Tasks > Document Upload > Super Benefit Payment
• Members: Email completed form to
  [e-mail].