Is the super withdrawal and re-contribution strategy over?

Yep. I forgot about the proportional rule. Or more correctly, overlooked it in this instance. So yes, some portion of the withdrawal would reduce the tax free amount in the fund and then increase it again with the re-contribution. Thank you, Steve, for bringing that up. I don't think in the simplified version of the facts I have here we can say exactly what the reduction in the tax free amount would be but safe to say there would be some reduction and a consequent reduction in the total tax saved on payment of the death benefit. As Daryl says, though, unless the whole fund is tax free then there is probably always going to be some benefit in it if that death benefit goes to, say, adult kids. All the other comments based on various assumptions bring in interesting ideas. Greg, I agree there is practical work to be done also. But aren't all those things you listed done with a few clicks of the mouse?

It is possible that a segregated pension setup is the background to this strategy, even if not stated.

However, I had assumed it was an accumulation account and therefore the proportioning rules at been overlooked. The reason being that further down below in the article a reference is made "with a few clicks of the mouse I have saved my children $$$".
If a client has segregated pensions, there is no way this is a simple procedure (in fact the same could be said for an Accumulation account aswell):

- letters from the member to the trustee to commute specific pensions and the associated Minutes
- assets need to be sold to fund the $540K commutation (unless there is $540K in cash, ie 21% of the portfolio? that would be a fair bit and have significantly eroded recent returns )
- Application for an account (for the re-contribution) and letters to commence new Pensions, with associated minutes, decisions on reversionary etc if applicable
- repurchase of assets
- if an Accountant or Adviser is involved and either recommends or endorses the strategy then an Advice document needs to be produced including outlining the overall costs in terms of Buy/Sell spreads or brokerage as well as time out of the market also need to be factored in as a risk (these are large transfers so the whole process could take a couple of weeks from sale , settlement, transfer out, clearing, transfer in, and repurchase of assets ).

I agree the strategy is beneficial to the member's children, regardless of whether proportioning was done correctly...but lets not underestimate the practical work involved.

The recontribution strategy will still work for balance equalisation if there is one balance less than the TBC after 1 July.

My guess interpretation of what Stephen has done is used segregated pensions whereby each pension is itself a separate entity (see ATO website for definition of). In doing so, one pension holds 100% concessional funds and the other pension holds 100% non concessional funds. It is possible to have more than one pension to hold these monies in segregated pensions but only as long as you have done so from the origins as one cannot unscramble an egg. Therefore he has withdrawn the monies from his concessional funds only (apart from his minimum pension withdrawal) and recontributed into an accumulation account and then commuted the Non concessional pension to accum, and then started a new segregated pension with those increased funds. Victoria

Good point Victoria, this is a good approach and possibly the background to the situation, however further down the page the comment is that with a "few clicks of the mouse I have saved my children $$$".

This is actually quite a project...selling assets to pay the money out and repurchasing of investments upon re-contribution (unless $540K (20%) + in cash is normal asset allocation), Minutes of trustees, paperwork for cessation and commutation of specific pensions , contributions and recommencement of pensions. For an Adviser or Accountant to implement and recommend this, it also involves an Advice document, calculation of costs such as brokerage or buy/sell spreads etc.

I agree with the article that this is a valid and worthwhile strategy for the children's benefit, however the calculation is either incorrect, or it is much more than a few clicks of the mouse when you factor in technical work, investment execution and compliance work involved.

I would have thought even if it is withdrawn in proportions (of tax fee and taxable elements) because it is then deposited back in as non concessional amount (ie a tax free amount) the effect is this 'washing' exercise is still valid as the % of tax free element is increased therefore the amount of 'death tax' is reduced compared to if you had done nothing.

Am I missing something ?

"After the re-contribution, the tax-free amount of my $2,500,000 superannuation balance becomes $1,540,000. The taxable component of my balance becomes $960,000."

Have you forgotten the proportional rule where part of the lump sum withdrawal would come from the tax free proportion of the fund?

Not so sure about the "greatest acts of tax generosity in Australian history". It's tax-free in super because you have already paid tax on it outside of super. And unless you had the extraordinary foresight of the likes of Nouriel Roubini, your $1M in June 2007 was probably looking more like $700K (or less) by late 2008. Yes, you would have largely made that back by now, but it's come back to you as.....a taxable component.