Advisers warned on licensee restrictions with recontribution strategies

Mr Manning said there are some important considerations for advisers to make before undertaking these sorts of strategies for clients, however.

One of the important things for advisers to check, he said, is what their licensee’s compliance policies are on these kinds of strategies.

“I have heard examples of some licensees saying that they’ll allow someone to do this [strategy] once, but not multiple recontribution strategies,” he warned.

“That’s something you need to check with your compliance team or manager.”

In terms of the ATO’s view, Mr Manning said the Tax Office has indicated that as long as it’s a simple or standard recontribution strategy, this will not attract the general anti-avoidance provisions.

Mr Manning noted that the ATO has not defined what it considers to be a simple or standard recontribution strategy.

“Something that I would have more concern with is the more exotic type ones that keep you below the total superannuation balance and the like, that’s likely to be considered tax avoidance,” he warned.

He also outlined some of the important considerations for clients, such as whether there is a better use for their non-concessional cap.

“If the client has money outside super and they’re paying tax on the income that generates, then they might be better off using their non-concessional cap to get those monies into super rather than just changing the components of their existing super, particularly if they’re paying high rates of tax outside of super,” he explained.

“If that’s not the case, then the recontribution strategy would be the next port of call.”

Mr Manning said SMSF professionals should also consider the potential tax and transaction cost, especially if the member is still in accumulation phase and the sale of assets will generate capital gains tax.

“There could also be transaction costs depending on whether anything needs to be sold,” he said.