The super strategy to spare your kids the dreaded death tax
Written and accurate as at: Aug 14, 2025 Current Stats & Facts
If you’re heading into retirement, you might have heard the term ‘recontribution strategy’ thrown around quite a bit. You probably guessed this involves withdrawing a lump sum from your super before immediately putting it back, but why would anyone want to do that?
Strange as it may seem, some very important changes take place once that money returns to your account, and this act of financial alchemy can have important tax implications for your children down the track.
The super death tax
To understand how a super recontribution strategy works, we need to remember that super is made up of two parts: a taxable component and a non-taxable component.
The taxable component contains your concessional contributions, such as the money your employer pays to your super on your behalf and any salary sacrifice contributions you make. It also includes the earnings your super has generated over the years.
The non-taxable component consists of non-concessional contributions – that is, the contributions you’ve already paid tax on. If you ever topped up your super directly from your savings without claiming a deduction, this is the basket it goes in.
That distinction might not seem important once you turn 60, which is when super withdrawals generally become tax-free. But the implications for your beneficiaries – specifically, your adult kids – can be enormous.
That’s because adult children who don’t rely on you financially are generally considered non-dependants under tax law. Unlike your spouse or any children under the age of 18 (who are classed as dependents), if you want them to get your super death benefit they typically have to pay tax at the time of inheritance.
This can be at least 15% of the taxable component of your super (plus the Medicare levy, if applicable). And considering this component is usually the larger of the two, that’s a hefty sum of money your kids will never see.
How a recontribution strategy might help
By withdrawing your money and then making a non-concessional contribution, you’re effectively converting the taxable component into a tax-free one.
That means when your kids receive your super death benefit, they’ll be dealing with a much lower – or potentially non-existent – tax bill.
This is possible because there’s a period after you reach preservation age and before you turn 75 when both withdrawals and non-concessional contributions are allowed.
As long as your accumulation account is still open (this is where your super has been sitting during your working years) and you don’t exceed any annual contribution caps and balance limits, you could be able to recontribute your super as many times as you like.
Superannuation and tax can be complex on their own, but combined they can be particularly difficult to get right. If you’re thinking of using a super recontribution strategy to lower your kids’ tax burden, a financial adviser can help you understand all the ins and outs so you don’t make any mistakes or run afoul of any regulations.