Financial advisers have been reminded to be aware of an unusual glitch around the use of recontribution strategies that affects retirees whose birthday also falls on the same day as the start of the new financial year.
MLC senior technical services manager Scott Quinn said the use of recontribution strategies by those aged between 60 and 75 was a popular way to reduce the taxable component inside super by withdrawing funds and returning them to that environment as a non-concessional contribution.
Speaking during a briefing to advisers last week, Quinn noted this strategy could be combined with the bring-forward rules to allow $360,000 to be recontributed, but a small number of people were blocked from doing so due to their birthdate.
“With the removal of the work test, we’re seeing the recontribution strategy for a lot more people close to age 75, but when you’re talking about the non-concessional bring-forward rule – to be eligible for that you’ve got to be less than age 75 at the start of the financial year,” he said.
MLC senior technical services manager Janet Manzanero-Caruana added: “This means that if your birthday is on 1 July and you turn 75 on that date, you can make the non-concessional contribution, but you can’t trigger the non-concessional bring-forward cap.”
Quinn said this was an unusual circumstance because someone who turned 75 on 1 July had until nearly the end of August to make the non-concessional contribution.
“The rule is that you can contribute up to 28 days following the end of the month you turn 75 so there’s a small window to be able to contribute after your 75th birthday,” he noted.
“As Janet said, if your birthday is on 1 July, you can contribute up until 28 August, but you can’t trigger the bring -forward rule, so age 75 on 1 July – some people are a bit unlucky with that one.”
