The withdrawal and recontribution strategy is a process employed to reduce the taxable component of a superannuation or pension balance and increase the tax-free component.

Despite the changes to superannuation from 1 July 2017, the withdrawal and recontribution strategy remains a valid strategy.

The non-concessional contribution bring forward rule is often used to maximise the benefits of the withdrawal and recontribution strategy.

This article includes the benefits of a recontribution strategy is and the rules associated.

What is a Withdrawal and Recontribution Strategy?

A withdrawal and recontribution strategy involves making a lump sum withdrawal from a superannuation accumulation account, or a larger than required pension payment from a pension account, and recontributing it back into superannuation as a non-concessional contribution.

A recontribution strategy requires a person to have met s full superannuation condition of release under the retirement rules. Click here to understand the retirement condition of release conditions.

If under age 60, there may be tax payable on the tax component of any withdrawals made from superannuation. Further, if a super balance includes a taxable (untaxed) component, tax may be payable on withdrawals at any age. Click here to read about tax on the taxable component.

Withdrawal and Recontribution Strategy Advantages?

The advantage of a withdrawal and recontribution strategy is that it effectively converts the ‘taxable’ components that make up a balance with ‘tax-free’ components.

The benefit of tax-free components within a superannuation account is that they can always be withdrawn tax free from the superannuation environment. Most people implement a withdrawal and recontribution strategy for estate planning purposes. This is because the taxable component of a balance is taxed at  15% plus the Medicare Levy if paid to a non-tax dependant (i.e. child over 18) upon death of the superannuation member; whereas the tax-free component is received tax free.

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An important, but less considered reason for implementing a recontribution strategy, is to protect against potential changes in superannuation legislation; particularly if withdrawals and pension payments began being taxed again for individuals over age 60. Under such circumstances, the tax-free component would continue to be received tax free, as it represents contributions made with after-tax dollars and therefore has already had tax paid on it.

How Do Taxable and Tax-Free Components Come About?

Each superannuation or pension account consists of either or both ‘taxable’ and ‘tax-free’ components.

In a superannuation accumulation account, tax-free components arise from non-concessional (after-tax) contributions and taxable components arise from concessional (deductible) contributions and earnings. Any withdrawals must be made proportionately from each tax component.

In a superannuation pension income stream account, the tax component proportions remain static for the life of the pension, based on the proportions on the day of commencement, expressed as a percentage. All pension payments must be made proportionately from each component.

Withdrawal and Recontribution Strategy Example

An example of a withdrawal and recontribution strategy is as follows:

Mary is 61 and has a superannuation accumulation balance of $500,000. Her balance, as of today, consists of $100,000 tax-free component and $400,000 taxable component (20% tax free / 80% taxable). She has not triggered the non-concessional contribution bring forward rule in either of the two previous financial years. Mary is no longer working and has met a full superannuation condition of release. All of her superannuation savings are unrestricted non-preserved.

To implement a withdrawal and recontribution strategy, she does the following:

  1. Makes a lump sum withdrawal of $300,000 ($60,000 (20%) tax-free / $240,000 (80%) taxable)
  2. Using the bring forward rule, immediately recontribute $300,000 as a non-concessional contribution

This strategy would have the following effect on the tax components within Mary’s superannuation balance.

Component Prior to Recontribution Strategy After Recontribution Strategy
Tax-free $100 000 $340 000
Taxable $400 000 $160 000
Total $500 000 $500 000

The withdrawal and recontribution strategy has converted the balance from 20% tax free/80% taxable to 68% tax free / 32% taxable.

Use this calculator to calculate the benefits of a superannuation recontribution strategy on your balance.

If Mary had passed away prior to implementing the withdrawal and recontribution strategy and had her superannuation paid to a non-tax dependant, death benefits tax of 17% (incl. Medicare) would have been paid on the taxable component – equating to $68,000 ($400,000 x 17%). However, had she passed away immediately after implementing the withdrawal and recontribution strategy and her balance paid to non-tax dependant, only $27,200 ($160,000 x 17%) in death benefits tax would be payable.

Non-Concessional Contribution Cap and Bring Forward Rule

From 1 July 2017, the non-concessional contribution cap is $100,000 each financial year. However, if you are under age 65, two years’ worth of the cap can be brought forward. This means $300,000 can be contributed as a non-concessional contribution over three financial years without needing to comply with the annual cap.

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Non-Concessional Contribution Restrictions

There are a few restrictions on who can make non-concessional contributions.


As of 1 July 2017, non-concessional contributions cannot be made by a person with combined superannuation and pension savings in excess of $1.6 million.

Also, a person over age 65 must satisfy the work test to make non-concessional contributions and a they cannot utilise the bring-forward rule.

Further, if you are in receipt of social security payments, such as the Age Pension or Disability Pension, you should understand the consequences of making lump sum withdrawals from super on your Centrelink payments.

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Bring Forward Rule Transitional Arrangements

If an individual triggered the non-concessional contribution cap bring forward rule prior to 1 July 2017, transitional non-concessional contribution caps will apply.

Read this article to understand the transitional non-concessional contribution caps.

Chris Strano

Hi, I hope you enjoyed reading this article. If you want my team and I to help with your retirement planning, click here. If you prefer a DIY approach, then check out the SuperGuy HUB. Thanks for stopping by - Chris.

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