ATO, Contributions, SMSF, Strategy

Recontribution tax benefits okay

ATO PBR Withdrawal Recontribution strategy

Several tax benefits resulting from a withdrawal and recontribution strategy have been deemed legal in a recent ATO private binding ruling.

A recent private binding ruling (PBR) from the ATO has confirmed superannuation withdrawal and recontribution strategies are legitimate and members implementing them can enjoy the tax benefits from them without fear.

Adviser Digest director and founder Peter Johnson noted PBR 7910161077376 dealt with inquiries as to the tax status of the recontributed amount, as well as if the strategy would constitute a breach of the anti-avoidance provisions in the Income Tax Assessment Act 1936 under Part IVA.

The application for the PBR was from a taxpayer who wanted to make a $30,000 withdrawal from his superannuation account and direct it back into his fund straightaway. To this end, he wanted the ATO to confirm the tax treatment for each aspect of this strategy.

“The individual asked: ‘Can I get a tax deduction for the amount contributed?’ and the answer was yes,” Johnson told attendees of the latest Auditors Institute practitioner webinar.

“The second question was would Part IVA apply and, this is directly from the tax office, it was considered a straight forward application of the law.

“[The ATO said:] ‘Accordingly, on the information provided in connection with your ruling application, it has been determined your question on whether Part IVA applies to this arrangement does not need to be addressed in the ruling.’

“Well I take that to mean you can implement withdrawal and recontribution strategies because it is a straight forward application of the law.”

The ATO has previously warned individuals not to pre-empt rulings it might make in certain circumstances regarding withdrawal and recontribution strategies.

The regulator took this position when, in 2022, it was asked to make a ruling as to whether a pension commenced from monies withdrawn and recontributed into super to provide tax-free death benefit payments to recipients such as adult children.

It said all relevant circumstances would have to be taken into account in that event.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital