Written

For

The

Australian

-

Dollars

&

Sense:

Can

I

use

a

super

recontribution

strategy

at

75?

Can you still use the super recontribution strategy after age 75? For most people, the answer is no — and it's one of those quirks of the super rules that catches people out right when they're doing serious estate planning.

This week I fielded two great questions in my Dollars & Sense column. The first was from Brian, 75, sitting on more than $3m in super and wondering if he could squeeze in a recontribution strategy before turning 76. The strategy itself is a beauty — withdraw a lump sum tax-free (if you're over 60 and retired), then recontribute it as a non-concessional contribution. Doing so converts the taxable component of your super into a tax-free component, which can save your adult, non-dependent children a hefty 15 per cent plus Medicare levy when they inherit your super.

But Brian has two problems. First, his $3m balance is above the $2m total super balance cap, which locks him out of non-concessional contributions. Second, once you tick over 75, the door slams shut on non-concessional contributions and the bring-forward rule altogether. The only ways money can go into super at that age are compulsory employer contributions or a $300,000 downsizer contribution if you sell your home. Timing matters — a lot.

The second question, from Tom, was about whether to use a maturing term deposit to pay down a $250k mortgage on a rental property. My take: run the opportunity cost numbers. If the loan rate is 5.75 per cent and the best 12-month term deposits are sitting under 4.5 per cent after the RBA's recent cut, paying down the debt wins on a pure numbers basis. If you're planning to invest in shares instead, ask yourself honestly whether you're confident of beating a guaranteed 5.75 per cent return. That's the real hurdle rate — and with further rate cuts on the horizon, it may drop closer to 5.25 per cent.