By Benjamin Waite, AMGENT Wealth Management. Reviewed November 2026 against ATO and Services Australia rules for the 2026–27 financial year. General information only, not personal advice.
Most Australians assume super passes to their family tax-free. For a spouse, it usually does. For adult children, it often doesn’t. The taxable part of your super can be taxed at up to 17% (15% plus the 2% Medicare levy) when it’s paid to them after you die. On a $800,000 balance that’s all taxable, that’s up to $136,000 that goes to the ATO instead of your family.
A recontribution strategy is one of the few legal, low-cost ways to reduce that tax. In short, you take money out of super (tax-free once you’re 60 and have met a condition of release) and put it straight back in as an after-tax contribution. The balance stays about the same, but more of it becomes tax-free component, and that part passes to anyone tax-free.
This guide explains how it works, who it suits and who it doesn’t, the 2026–27 limits, three worked examples and the traps we see most often.
What is a super recontribution strategy?
Your super is made up of two tax components (ATO):
- Tax-free component: mostly non-concessional (after-tax) contributions you didn’t claim a tax deduction for, plus any amounts “crystallised” before 1 July 2007.
- Taxable component: everything else. That includes employer (Super Guarantee) contributions, salary sacrifice, personal contributions you claimed a deduction for, and investment earnings. For most people this is 80–100% of their balance.
While you’re alive and over 60, the split rarely matters, because withdrawals from a taxed fund are tax-free. It matters when you die and your super goes to someone who isn’t a tax dependant.
A recontribution strategy has two steps:
- Withdraw a lump sum from super (tax-free if you’re 60+ and in a taxed fund).
- Recontribute it as a non-concessional contribution (or a downsizer contribution), to your own super or your spouse’s.
The amount you put back in counts as tax-free component. The taxable component falls by the taxable share of what you withdrew.
Why the tax on death benefits matters
Who pays tax on your super after you die depends on who receives it, not on your age.
| Beneficiary | Tax-free component | Taxable component (taxed element) | Taxable component (untaxed element) |
|---|---|---|---|
| Tax dependant (spouse or de facto, child under 18, financial dependant, interdependent) | Tax-free | Tax-free (lump sum) | Tax-free (lump sum) |
| Non-dependant (e.g. an independent adult child) | Tax-free | Up to 15% + Medicare levy | Up to 30% + Medicare levy |
Source: ATO, Payments from super and Schedule 12. Funds withhold 17% and 32% when they pay a non-dependant directly.
So the usual problem comes at the second death in a couple. The surviving spouse inherits tax-free, but when they die the whole balance often goes to adult children, and the taxable part is taxed.
Two practical notes:
- Paid directly or through the estate. If the fund pays your estate and your executor passes it on, the same maximum rates apply, but the Medicare levy is generally not added. That makes 15% the floor of what you’re trying to avoid, not 17%.
- Insurance inside super can create an untaxed element in some death benefits. That’s taxed at up to 32% for non-dependants, and recontribution doesn’t remove it in advance. Ask your fund how your insured benefit would be taxed.
How the proportioning rule limits what you can convert
You can’t choose to withdraw only the taxable part. Under the proportioning rule, every withdrawal comes out in the same tax-free to taxable ratio as the account it comes from (ATO).
If your account is 20% tax-free and 80% taxable, a $100,000 withdrawal is $20,000 tax-free and $80,000 taxable. Recontributing the $100,000 converts only $80,000 of taxable component, because $20,000 was already tax-free.
This is why the first recontribution does the most work. A second round from the same mixed account converts less, unless you keep the recontributed money in a separate account (see Example 2).
Two more things affect the split over time:
- In an accumulation account, investment earnings are added to the taxable component, so the tax-free percentage slowly falls.
- When you start an account-based pension, the percentages are locked in at that point and apply to every pension payment and to the death benefit. Starting a pension straight after a recontribution, from an account that’s 100% tax-free, keeps it 100% tax-free.
Who can use it? Eligibility in 2026–27
You need to clear both gates: you must be able to take money out, and you must be able to put it back in.
Gate 1: Getting the money out
- Preservation age is now 60 for everyone (ATO).
- You need a condition of release for a lump sum. The common ones are:
- retirement after reaching preservation age
- leaving any job after turning 60, even if you keep working elsewhere (only the balance at that point is released)
- turning 65, whether or not you’re working
- Lump sums from a taxed fund are tax-free from age 60.
- What about the low rate cap ($260,000 from 1 July 2026)? It only applies to people between preservation age and 60. Because preservation age is now 60 for everyone, it rarely comes into play. Withdrawals before 60 (for example, on permanent incapacity) follow different rules and need specific advice.
Gate 2: Putting it back in
| Rule (2026–27) | Limit |
|---|---|
| Non-concessional cap | $130,000 a year |
| Bring-forward, TSB under $1.84m at 30 June 2026 | Up to $390,000 over 3 years |
| TSB $1.84m to under $1.97m | Up to $260,000 over 2 years |
| TSB $1.97m to under $2.1m | $130,000, no bring-forward |
| TSB $2.1m or more | Nil |
Source: ATO, Non-concessional contributions cap. TSB means total super balance. The $2.1m figure is the general transfer balance cap from 1 July 2026.
- Age: there’s no work test for non-concessional contributions from 1 July 2022. You can use the bring-forward rule if you’re under 75 at any time in the financial year. Your fund must receive the contribution within 28 days after the end of the month you turn 75 (ATO).
- Existing bring-forward: if you triggered a bring-forward in the last two years (including from a property sale or inheritance), your remaining room may be smaller than you think. Check your contributions in myGov before you withdraw anything.
- TSB timing: your limit is set by your TSB on the previous 30 June. Withdrawing money today doesn’t raise this year’s limit.
- Downsizer: if you’re 55+ and selling a home you’ve owned for 10+ years, a downsizer contribution of up to $300,000 each also counts as tax-free component. It doesn’t use your non-concessional cap, and there’s no upper age limit.
Example 1: A single recontribution (illustrative)
Illustrative only. Figures are rounded, assume no investment growth or fees, and use 2026–27 rules.
Margaret, 66, is widowed and retired. She has $800,000 in an accumulation account that is 100% taxable. Her TSB on 30 June 2026 was $800,000, and she hasn’t made non-concessional contributions in the past three years. Her two adult children will inherit.
She withdraws $390,000 tax-free and recontributes it as a non-concessional contribution under the three-year bring-forward rule.
| Before | After | |
|---|---|---|
| Balance | $800,000 | $800,000 |
| Tax-free component | $0 | $390,000 |
| Taxable component | $800,000 | $410,000 |
| Potential tax for adult children (paid directly, 17%) | $136,000 | $69,700 |
| Potential tax (via estate, 15%) | $120,000 | $61,500 |
Potential saving to her children: about $58,500 to $66,300, from paperwork and a few days out of the market.
Example 2: Doing it again, and why a separate account helps (illustrative)
Margaret’s bring-forward period covers 2026–27 to 2028–29. Suppose that in 2029–30, at age 69, she can contribute another $390,000 (assuming caps and her balance are unchanged; actual caps will be indexed).
- Same mixed account. Her account is now 48.75% tax-free. A $390,000 withdrawal is only 51.25% taxable, so it converts $199,875. That leaves $210,125 taxable, a potential tax of about $35,700 at 17%.
- Separate account. If her first recontribution went into a new, separate account, her original account is still $410,000 and 100% taxable. Withdrawing $390,000 from that account converts the full $390,000. Only $20,000 stays taxable, a potential tax of about $3,400.
Lesson: where your fund allows it, hold recontributions in a separate account (or start a pension from them), and tell the fund not to merge the accounts. An SMSF can’t hold two accumulation interests for one member, so SMSF members often use a pension interest or a second fund instead.
Example 3: Recontributing to a spouse to manage Division 296 (illustrative)
David, 67, has a TSB of $3.4 million. Jenny, 63, is retired with $900,000. Assume 6% realised earnings.
Division 296 adds 15% tax on the share of earnings linked to the part of a TSB above $3 million, from 1 July 2026. For 2026–27, it uses the balance at 30 June 2027.
| David before | David after moving $390,000 to Jenny | |
|---|---|---|
| TSB | $3,400,000 | $3,010,000 |
| Share above $3m | 11.76% | 0.33% |
| Earnings (6%) | $204,000 | $180,600 |
| Estimated Div 296 tax | ~$3,600 | ~$90 |
David withdraws $390,000 tax-free and gives it to Jenny. Her TSB was under $1.84 million on 30 June 2026, so she contributes it under her own three-year bring-forward. As a bonus, it becomes tax-free component in Jenny’s account. Moving money within a couple is generally not treated as a gift for Centrelink.
The same idea helps a couple use both transfer balance caps ($2.1 million each from 1 July 2026, subject to each person’s personal cap). It can also help with the Age Pension where one partner is younger. Super in accumulation phase isn’t assessed by Centrelink until its owner reaches Age Pension age (67) (Services Australia).
Step by step: how it’s usually done
- Get your numbers. You’ll need your balance and tax-free component (from your fund), your TSB at last 30 June (myGov, ATO online services), and any non-concessional contributions in the last three years.
- Check eligibility. Confirm your condition of release, your age against the 75 deadline, your cap and any bring-forward already running. Do this for your spouse too if you’re contributing for them.
- Decide the amount and structure. Choose your account or your spouse’s, the same account or a separate one, and a lump sum or a commutation from a pension.
- Check the side effects: insurance, pension payments, Centrelink, Div 296, and transaction or CGT costs inside the fund.
- Withdraw. Many funds pay within days. If you’re in pension phase, ask the fund to commute part of the pension as a lump sum.
- Recontribute promptly as a personal contribution. Don’t lodge a notice of intent to claim a tax deduction, or the contribution becomes concessional (taxable) and is taxed at 15%.
- Confirm and record. Ask the fund to confirm the new components in writing. Then update your binding death benefit nominations, especially if you now have two accounts.
- Diarise the next window, when your bring-forward period ends and before age 75.
Who it suits, and who it doesn’t
Often suits:
- people aged 60–74 who have met a condition of release, especially singles, widows and widowers
- people whose super will probably go to adult children or other non-dependants
- people with mostly taxable balances (long careers on SG and salary sacrifice)
- couples with very uneven balances (for the transfer balance cap, Div 296 or Age Pension)
- people with cap room, for example a TSB well under $1.84 million and no recent bring-forward
Often doesn’t suit (or matters less):
- people whose super will go to a spouse or minor children, because those benefits are already tax-free (though it can still help on the second death)
- people under 60, or anyone who can’t meet a condition of release
- people 75 or over, unless a downsizer contribution is available
- people with a TSB of $2.1 million or more, who can’t make non-concessional contributions to their own account
- people who would lose valuable insurance, a defined benefit or a legacy pension by withdrawing
- people who plan to spend most of their super in retirement anyway
Risks and traps to check first
- Exceeding your cap. A bring-forward you forgot about can make the recontribution excess. You can withdraw excess non-concessional contributions, but associated earnings are taxed. Check before you withdraw, not after.
- Missing the age-75 deadline. The contribution must be received by the fund in time, not just sent.
- Losing insurance. Closing or emptying an account can cancel death or TPD cover you can’t replace at your age.
- Accidentally claiming a deduction. A notice of intent turns the contribution concessional, and you lose the benefit.
- Pension issues. Commuting part of a pension changes your minimum drawdown and your transfer balance account. Starting a new pension needs cap space.
- Costs and market timing. Selling assets can incur buy–sell spreads and, in an SMSF, realised capital gains, which also count as Div 296 earnings. Being out of the market for days carries some risk.
- Centrelink. Money moved to a younger spouse’s accumulation account can improve the Age Pension, but deeming and gifting rules apply to amounts moved outside the couple.
- The rules can change. Contribution caps are indexed, and death benefit and super tax rules have changed before. Review the plan every year.
- Estate structure. Whether benefits are paid directly or through the estate, plus any testamentary trusts, affects the final tax. Coordinate with your will. See our estate and succession planning service.
Frequently asked questions
What is a recontribution strategy in super?
It’s withdrawing a lump sum from super (generally tax-free from 60, once you’ve met a condition of release) and contributing it back as a non-concessional or downsizer contribution. This turns taxable component into tax-free component, which can reduce the tax adult children pay when they inherit your super.
How much tax do adult children pay on inherited super?
Non-dependants pay no tax on the tax-free component. They pay up to 15% plus the 2% Medicare levy (17%) on the taxable component (taxed element), and up to 32% on any untaxed element. When the benefit is paid through the estate, the Medicare levy generally doesn’t apply.
How much can I recontribute in 2026–27?
Up to $130,000, or up to $390,000 using the bring-forward rule if your total super balance was under $1.84 million on 30 June 2026. The limit is $260,000 if it was $1.84 million to under $1.97 million, and $130,000 with no bring-forward from $1.97 million to under $2.1 million. You can’t make non-concessional contributions if your balance was $2.1 million or more.
Can I do a recontribution strategy after 75?
Generally no. Non-concessional contributions must be received within 28 days after the end of the month you turn 75. A downsizer contribution from selling an eligible home has no upper age limit and also counts as tax-free component.
Can I use a recontribution strategy if I’m still working?
Yes, if you meet a condition of release. That can be turning 65, or leaving a job after turning 60 (which releases the balance at that point). The work test doesn’t apply to non-concessional contributions.
Is it worth it if my spouse will inherit my super?
A spouse receives death benefits tax-free, so there’s no immediate saving. Most couples use the strategy to protect the eventual inheritance by adult children after the second death, or to balance super between partners.
Should I recontribute into a separate super account?
Often, yes. A separate account keeps the recontributed amount 100% tax-free, so future withdrawals and investment earnings don’t dilute it. You can also nominate different beneficiaries for each account. SMSFs can’t hold two accumulation interests for the same member, so check what your fund allows.
Does a recontribution strategy affect the Age Pension?
Recontributing to your own super usually doesn’t change your assessable assets once you’ve reached Age Pension age. Recontributing to a younger spouse’s accumulation account can reduce assessable assets until they reach 67.
Where to from here
Recontribution is simple in concept, but the value lies in the timing: your cap, your spouse’s cap, bring-forward windows, the age-75 deadline, pensions, insurance and your estate plan. Getting one of these wrong can cost more than the strategy saves.
- Estimate your numbers with our free recontribution strategy calculator.
- Check whether Division 296 affects you.
- Talk to us about superannuation and SMSF advice, estate and succession planning or retirement planning.
Book a superannuation strategy review. We’ll model your withdrawal and recontribution plan, check eligibility for you and your spouse, and coordinate it with your will and nominations.
Related reading: How much super do I need to retire? · Can I retire at 60 with $1 million? · Selling an investment property before retirement · What to do after selling a business · Pre-retirees and retirees
Sources: ATO, Tax on super benefits; ATO, Payments from super (low rate cap, lump sum tax table); ATO, Calculating components of a super benefit (proportioning rule); ATO, Non-concessional contributions cap; ATO, Restrictions on voluntary contributions; ATO, Transfer balance cap; ATO, Conditions of release; ATO, Superannuation death benefits; Services Australia, Superannuation (Age Pension); Moneysmart, Tax and super.
General advice warning: This article contains general information only and doesn’t take into account your objectives, financial situation or needs. Consider whether it’s appropriate for you and read our Financial Services Guide before acting. All examples are illustrative, use rounded figures and 2026–27 rules, and aren’t predictions. Super and tax rules change; figures were checked in November 2026. AMGENT Wealth Management Pty Ltd is a Corporate Authorised Representative (001318113) of AFSL 380552.