Bring-forward measure opens opportunities for recontribution
The passage of the measure to allow those between 65 and 67 to use the bring-forward rules will open up some interesting possibilities with recontribution strategies for clients in this age group, says a technical expert.
In an online blog, Heffron managing director Meg Heffron explained that while recontribution strategies in general have become less desirable following various superannuation law changes, if the bill to enact the bring-forward measure for over-65s is passed, this could make recontribution strategies much more accessible to this age group.
Historically, Ms Heffron said only those with less than $1.4 million in super at 30 June 2020 who were younger than 65 on 1 July 2020 (the start of this financial year) can make a non-concessional contribution of $300,000.
“Those with more than $1.4 million but less than $1.5 million can only bring forward one year’s extra cap and contribute $200,000 this year. Those with more than $1.5 million but less than $1.6 million only get the current year’s cap, and those with $1.6 million or more cannot make non-concessional contributions,” she reminded SMSF professionals.
However, the change to the bring-forward rules currently working its way through Parliament will make these higher caps accessible to more people, she said.
“This is a boon for recontribution strategies for a few reasons. First, it will be possible to do it for longer — the golden $300,000 opportunity will last until the year in which the contributor turns 67,” she noted.
“Secondly, anyone over 65 is allowed to take their money out of super (the first leg of a recontribution strategy) whether they are working or not.”
This means that for many clients, there will now be a lengthy period where they can do all the things necessary for a recontribution strategy — take the money out of super but also put it back in, she said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.