One of the legislation changes (read about them all by clicking here) is a change to the work test, which bumps out the ability to make Non-Concessional Contributions up to age 74 without having to work.
This opens up a great strategy to mitigate the potential super tax which can occur if your money is left to adult children.
Most people’s Superannuation balances is from a contribution of Super Guarantee and Investment Earnings, both of these form the Taxable Component of your Superannuation balance.
Let’s say you are retired and age 65 with a superannuation balance of $800,000, all of which is taxable taxed component (there are different rules for Untaxed Taxable component which we won’t go into)
If you were to pass away and your adult children are to inherit the benefit, they will be looking at $136,000 tax bill on that inheritance. Now you might say, well they are still getting money anyway. But who is going to benefit the most from that $136,000? You children or the government?
With the changes to the work test, we can now make a series of withdrawals tax free from your pension account and contribute the money back into a new pension account making it full of Tax Free component, which as you guessed it, will be tax free to your adult children on inheritance.
To do this we will be triggering the “Bring Forward Rule” allowing us to make a once off $330,000 NCC, and then another one in three years time, until the goal is met.
This is now possible now we don’t have to satisfy the work test for Non-Concessional Contributions.