I currently have an income account with QSuper from which I draw a monthly pension. As I am over 60, my pension is tax free.

I have heard that if I withdraw all of my account balance it will be tax free and I can then somehow recontribute it back as an after tax contribution so that my beneficiaries won’t pay tax.

Is this correct? Does the bring forward limit of $390 thousand over three years apply if I try to recontribute back the entire sum. Is there some special name for this type of action?

This strategy is commonly referred to as a ‘cash-out and re-contribution strategy’.

The purpose of cashing out super and re-contributing it back is to convert “taxable” super components into “tax-free” super components.

Why do this? Because when you pass away, your taxable component will be taxed at 17 per cent (which includes Medicare) if it is paid to beneficiaries not listed below:

a person with whom the deceased person had an interdependency relationship just before they died

a person who was financially dependent upon the deceased person just before they died.

However, the tax-free component is always paid tax free – no matter who the funds are left to.

Most people have mainly “taxable” components within their super. This is because all of the........

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