COVID-19 Super Withdrawal Scheme Concessional Recontribution

Is there any reason that you couldn't withdraw $10k or $20k under the government's plan tax-free, and then immediately recontribute $10k or $20k concessionally (as long as you are under the concessional limit) taking that contribution as a tax deduction?

Therefore you wouldn't lock in your losses and you'd still get a nice tax cut at the end of it?

I've crunched the numbers and from a Sole Trader perspective (especially one in the service industry) there has not been a lot of word from the govt about tax relief. Mainly large companies etc.

If you contribute concessionally it's a 15% Tax. If you take out 20k tax free at a marginal rate of 37.5% you'd save around 22.5% tax. (37.5-15%)

So around $4500 dollars tax savings. And you'd reinvest in your super at the same time preserving growth opportunities.

Here is the official fact sheet:

ATO Actually approves of this!!! From page 2 " He is also free to recontribute any unused amounts to his superannuation in the future (within
his contribution caps)."

AFR article about this: "TAX ACADEMICS" AKA ozbargain academics. Lol ANU ripped off my idea


  • Why go pushing tax loopholes now? Very strange priority indeed.

  • I think the withdrawal will still need to meet some hardship limit, so if you can afford to recontribute you probably won't qualify.

  • Yes, you should exploit a loophole and Rort money from the good tax payers, you should ask your clients to delay payment, and go on the dole too.

    Btw (i would iamgine) it will be legislated that you cant claim concessional contributions above this amount in the same tax year, you will need to be on benefits in the first place, you will need to prove you have lost this 20% income etc

    • I highly doubt this. There would be no way to tell where the money came from. The concessional cap (aside from roll-over amounts) is $25,000 a year and has not and will not change. Unless your concessional cap was reduced by an amount equal to a withdrawal. In which case you would just contribute $10k first and then withdraw. FIFO rules would apply.

    • From the fact sheet by the ATO posted above " He is also free to recontribute any unused amounts to his superannuation in the future (within
      his contribution caps)."

      So looks like all signs are a go.

      • that is utter stupidity then, politicians are not very bright when it comes to thinking of these things.
        every sole trader in Australia with or without the need to do, is going to recycle this money.

  • Please, please, please everybody. I know individual circumstances will differ, but please don't dip into Super and potentially affect your retirement in these times unless you absolutely positively must.

    Get the government paying for this. Make the banks wait for payments.

    Don't sell your future short when it's a government's responsibility to steer the ship here.

    • What are your suggestions for people who have received nothing from the ~$200 billion package so far and don't qualify for anything due to assets tests? There will be a fair number of people faced with selling a large asset in a depressed market or to raid their super. I know which I would be doing.

    • Government can steer the ship but individuals surely still need to pay their own way?

      • Please let the thousands of people getting sacked today that they need to pay their own way from today.

        • Those queues are because of the double dole cash splash extravaganza.

          Plenty of people are expected to pay their own way. Those same people even get shafted by the artificially low interest rates, set not with economic theory but simply because lots of borrowers made bad decisions. It will be many months of corona virus recession conditions before being the equivalent of what has been done to savers/depositors over the last 10 years. As always, government policies chase the 51% lowest common denominator.

          The RBA target band for inflation is 2.5-3.0%, yet it sets interest rates at 0.25%. Plenty of people have been expected to pay their own way for many years.

          • @Frugal Rock: Even in the high (rate) times, if you're relying on interest rates for returns, you need to re-think your investment strategy.

            • @Chandler: Were you not alive during the 80s or too heavy in Anacott Steel?

              Give me some confidence you know your stuff. What was the pattern for Aussie Bonds 1980-1990?

              • @Frugal Rock:

                Were you not alive during the 80s or too heavy in Anacott Steel?

                Hah! Blue Horseshoe LOVES Anacott Steel! Alive? Yes. Investing? No.

                What was the pattern for Aussie Bonds 1980-1990?

                Don't know, as I wasn't investing then and have never looked into bonds personally. Were we not talking about cash in bank accounts ("savers/depositors"), not bonds? May have been a bad presumption on my behalf.

                • @Chandler: Lol, Aussie bonds were not Australian Bonds. Google was not your friend. :(

                  • @Frugal Rock: Another (reasonable IMO) presumption on my part - nothing to do with Google. So who are/were Aussie Bonds?

                    • @Chandler: Retail level depositor government issued bearer bonds. Circa 15% government guaranteed if I recall.

                      I don't quite understand how you are an expert on high interest eras if you were only wearing nappies during them.

                      What, would you say, is the most signficant governmental policy change that allowed interest rates to fall near zero?

                      • @Frugal Rock: Thanks for that. 15% is pretty good (IMO). What sort of time frame are bonds for?

                        I don't quite understand how you are an expert on high interest eras if you were only wearing nappies during them.

                        Sorry, didn't mean to come across as a professional - my initial statement was that (bank) interest is generally a bad investment - you can typically get better returns without (much) more risk.

                        What, would you say, is the most signficant governmental policy change that allowed interest rates to fall near zero?

                        Wouldn't be able to give a authoritative answer to that.

        • Emergency fund. We just had this conversation in the other thread.

  • Sad post really, get a grip of what's going on

  • I am all into this. Sounds amazing. PLease let us know if you can do this.

    Can an individual do the same? I am not a sole trader. And also any way to prove that the income is 20% less now. My work has not been affected at all.

    • From page 2 on the fact sheet i have posted

      " He is also free to recontribute any unused amounts to his superannuation in the future (within
      his contribution caps)."

    • I don't think so. I believe this would be classified a a scheme of which the dominant purpose is to obtain a tax benefit, and therefore any such benefit would be reversed by the general anti-avoidance legislation.

      • Yeah, I was thinking that the general avoidance principles would catch you.
        But perhaps if you can demonstrate that something changed between withdrawl and recontribution, you may be able to argue that that is why you re-contributed.

        • If the re-contribution were incidental, then it would be fine. An issue would only arise where, as OP is suggesting, people withdraw the maximum amount intending to re-contribute all of it, with the only purpose borne in mind being the evasion of tax.

          • @Charlatan: I think if you're treating this as some sort of law class exercise, then perhaps the scheme would fall afoul of this.

            However as a realist, I'd be willing to bet every day of the week no one will get pulled up on this.

            If your mental gymnastics are good enough you can generate a good enough story to satisfy.

            • @meowsers: A story is not good enough to satisfy Part IVA. You need objective evidence of purpose, and evidence that a non-tax benefit was obtained. Your best hope is that nobody at the ATO cares about this, because if they do it will be easy to identify the risk population and easy to assess them. The other hope you may have is that I am wrong about Part IVA applying to contributions tax. That's the more likely option.. at the end of the day it's up to you, but what you are talking about is scheming plain and simple, thus indirectly screwing everybody else who pays taxes. People being selfish is what has made this situation so dire.

  • Anyone withdrawing from their super should have this considered when applying for the Age Pension in the future.

    It is unfair for tax payers that some people get tax concessions on super, bleed it dry and then expect the Age Pension when they retire with little in Super.

    • How do you know the beneficiary will be alive then?

      How do you know how little or how big such hypothetical Super will be … in the future?

      To reach the future (retirement) you'll need to live the present first (bills, food, housing. medicines, relationships).

      • How do you know the beneficiary will be alive then?

        They will cash out their Super or apply for the Age Pension. The latter of which I would like automatically blocked.

        How do you know how little or how big such hypothetical Super will be … in the future?

        You mean now or when we are in the future? Super companies will have the unit price information + earnings / dividends paid.

        bills, food, housing. medicines, relationships).

        These are not what Super is for. People are expected to take care of their shit in life.

        • These are not what Super is for. People are expected to take care of their shit in life.

          So Super is not for that?
          What is it for?
          Isn't it to pay for "their shit" after retirement? Why not now? What does change?

  • To the OP, love your vision.

    At the end of the day, more (tax) benefits for you, theoretically means more money to go spend in the economy.

    That said, as much as I'd love to spend, I can't as I am in self isolation, and even if I wasn't everyone will think I'm a d1ck for going out.

  • Hello, does anyone know if this apply for someone with temporary resident visa? A friend of mine in a situation could use some of this help. Thanks

    • Your friend (temporary resident) could/will get all Super when leaving Australia.
      Planned properly and will be almost tax free (new Financial Year).

      • She plans to leave Aus in two years, but could use the super access in the near future. IS there any way that this could happen?

  • I was also wondering about this.

    Feels bad to be looking for an upside here, but ya gotta be pragmatic.

  • Have a read of Part IVA of the ITAA 1936.

    • Lol that's assuming they actually:

      A) enforce this
      B) in any way could accuse you of avoidance especially with their fact sheet saying you can re contribute if you feel you don't need it anymore.

      • The fact sheet specifically refers to unused, i.e. residual, amounts. Don't put it beyond the ATO to hunt down blatant schemers. It will be especially obvious if you withdraw 10k, spend none of it, and then decide that you need an extra 10k.

        All this conversation void if you consider the moral implications and just decide to do the right thing.

  • So I got out the spreadsheet. Here are my musings….

    If you want to get the 10K and then re-contribute to put your super balance back to where it is, you need to re-contribute more. This is because in order to access the tax deduction, the re-contribution will be taxed at 15%.

    In short, if you withdraw 10K, you need to re-contribute 11,764.71. 15% of this is 1764.71 - net $10K

    This gives you a tax deduction outside of super at your marginal rate. So if you're on the top marginal rate, it's a tax deduction of $5529. But you had to spend your own money above the 10K, so the whole net position is $3764. This amount drops as the marginal rate drops, and goes negative if the marginal tax rate outside of super is less than the amount inside (15%). (I don't think there is a marginal rate < 15% though, but if you're below the tax free threshold, (0% marginal), then you wouldn't do this.

    There are cashflow issues with this too. You need to stump up extra amount to cover conts tax, and you dont get that back until you get your tax return. It might be best to think of doing all this just before FYE, but not too close - you need to give your fund time to actually process the withdrawl and contribution. My guess is the withdrawl will be a somewhat manual process - there won't be automatic systems in place to allow this. The re-cont can usually be done with no human touch though.

    Other risks include being out of the market in your super - to the extent that is a risk. You may miss out on being in the market during what may be significant rises. It's not inconceivable that towards the end of the financial year, we will be closer to the end of this crisis and there may be periodic substantial rises in the market.

    In my view, it's probably just not worth the hassle, especially when you then layer on top the general avoidance provisions of the tax act. All over a maximum benefit of $3764.

    • You're assuming I don't have 11,764.71 in the bank.

      $3764 is plenty for me. Remember that's 3764 x 2. IDK but for 15 minutes of work it's brainless.

      Assuming you withdraw as close as possible to the financial year and the beginning of the new one, once FY21 comes around the market may be back up. Thus leaving you in a much higher position with regards to the recontribution.

      Remember that the rich get richer. And OzBargainers will go in hard for a $1 savings.

  • There are always people who think they can scam the system to there benefit, when the govt starts handing out money, you watch this money scheme be scammed by certain ethnic groups…

    It's going to be a field day for em..

    • If you call rich people with good (dodgy) financial advice an ethnic group then yeah, ok

      Back off on the racist shit - it's not necessary ok

  • My brother asked me about this and I wasn't sure if it was a good idea or not…

    He is 31years old and has about 8k of Credit card debt and wants to withdraw his super to pay it off.

    Do you think this is a good idea ????

    • Provided he is disciplined and puts the money he would have paid off the credit card back into super as a concessional contribution it is a very smart move.

      If he uses the super to pay off the credit card, then just gets into more debt and never pays it back it is the height of stupidity.

  • Morality.

  • Are wage earers who lost in super/shares allowed to do this or not because the shiznut salary they are getting?

  • Merged from Is This a Theoretical Tax Loophole?

    Not suggesting people do this and it would only apply to those who qualify and therefore probably need the money but theoretically:

    Under the gov's early access to super scheme some people can withdraw 10K this FY and same next for compassionate grounds.

    What's to stop you taking this out and putting it straight back in, then claiming the tax offset at return time? I.e. the difference between 15% and your marginal tax band.


    To apply for early release, you must satisfy one or more of the following requirements:

    • You are unemployed.
    • You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance.
    • On or after 1 January 2020, either
      • you were made redundant
      • your working hours were reduced by 20% or more
      • if you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.

    You will not be required to attach evidence to support your application; however, you should retain records and documents to confirm your eligibility.

    • Yes, it is - however, if you have been made redundant or dont have a job; would you have $10K lying around to put into super?

      • all on black

      • +1 vote

        Two of the eligibility paths require only a 20% downturn.

        Professions such as a plastic surgeon, QC, etc could suffer a 50% downturn and still easily have that kind of cash on hand.

      • It's not having $10k lying around. You need to be able to salary sacrifice the $10k over the next 3 months to get the tax benefit.

        • @donga100.

          As of 01/07/19 you could put money in after tax, fill out a form and then get a tax refund on the difference between 15% and your top marginal rate. It's designed to help all those not able to access salary sacrifice. As before the maximum is $25k and includes any Superannuation Guarantee contributions

    • Is This a Theoretical Tax Loophole?

      No - it's an actual loophole. There's been several articles in the media about it.

      What's to stop you taking this out and putting it straight back in, then claiming the tax offset at return time?


      Further, for high income earners or people that typically max out the 25k concessional contribution limit, there's an opportunity to convert 10k (and another 10k next year) from your concessional balance to a non-concessional balance. Non-concessional balances have tax free growth in super. It's great for income producing assets like rental houses.

    • In current climate, cash is king. Superannuation is facing unprecedented withdraw requests, and any money that goes into it, is likely more than welcomed by the superannuation company, as well as government itself in the interest of stabilising share market. Therefore I'd say more likely an intentional loophole designed by the government.

      • Therefore I'd say more likely an intentional loophole designed by the government.

        Your conclusion does not follow from your premise. The scheme described by OP will result in, at best, a net zero movement of funds. (At worst, 10k out of super and then you forget to put it back in)

        • Could also lose money overall if the super fund goes up substantially while you are cashed out.

  • you should be able to do this with a non-concessional contribution, you just have to notify the super fund that you intend to claim deduction against the contribution.

  • Merged from Covid19 Super Tax Loophole and Implication

    Hi fellow OzBargainers,

    I have been told by my employers that everyone in the company will be taking 20% paycut and only work 4 days a week starting from May.

    And things get interesting as there is a coronavirus tax loophole where I might be able to save some tax by withdrawing whole lump sump of $10,000 and salary sacrifice it back to my super.

    more on how to do it would be on the article below.

    Question is, Should I do it ?


    • You will get caught.
      They have literally said they will be targeting people who do this

      • What are they going to target? It's perfectly legal based on their current rules.

        The only thing they can do is close that loophole.

        • its not though.
          Withdrawing your super under the current climate and using it to obtain a tax benefit is illegal and they are targeting people who do it.
          The commissioner has said as much repeatedly

          The article that is linked was from 2/4
          They have come out and stated categorically that these schemes are not legal under the early release legislation and punishments will be forthcoming to anyone who does it.

          • @jimbobaus: The only noise I heard was about claiming the government rebate if your income is below the threshold not the ability to salary sacrifice as above. Do you have any link or info to contradict this.
            The $500 co-contribution

            However I've hear blip about salary sacrifice to reduce tax as that appears to be well within your rights. Happy to get more info on this though.

            • @wiipantz: Was all linked in the post that this is a duplicate of.
              But the ATO has made it crystal clear.
              If you withdraw your super early with the intent of using it to gain a tax advantage: you will be caught and punished.

              • @jimbobaus:

                If you withdraw your super early with the intent of using it to gain a tax advantage.

                "But I took it out to help me get through this difficult period and then I realised I didn't need it so I'm putting it back to save for my retirement".

                The ATO is free to TRY prove that I had other intentions.

                It's no different to the people who sign a stat dec saying that they intend to retire so that they can access their super and then go back to work again after that. Good luck proving they didn't "intend" to retire!

                • @bobbified: the taskforce that is being set up has a clear and targeted focus.
                  Good luck to you if you do it.
                  As someone who has witnessed the way the ATO will go after you (not personally but from the outside looking in)
                  its about you showing your intentions not them
                  as with any Gov department when they take you on, guilty unless you can show otherwise.

                  i wish you luck if you do it, Employers have been sent (or are getting info) about the rules regarding this etc also for those wanting to SS
                  My cousin as i have mentioned before works at the ATO and the commissioners directive is clear, zero tolerance if you withdraw to gain a tax advantage or they perceive you to be doing so.

                  • @jimbobaus: Again, there's nothing to target someone for that directly for using that loophole. This isn't the first loophole in Super tax (and it won't be the last). Ive been in the industry for almost 20 years and the best they've done is you tighten up whatever loophole there is. They don't retrospectively go back and target someone.

                    The ATO are actually directing all their manpower to target those who are trying to rort the JobSeeker and JobKeeper schemes.

                • @bobbified: I wonder whether red flag would be raised if I withdraw $10k and Salary sacrifice at the same time ?

                  • @D A Y: Raised where exactly? With the employer or ATO? It's a curious one this, result of hairbrained legislature imposed in a rush without meaningful debate.

                  • @D A Y: There's no flag as such, but they may eventually go back and do some data matching to check and confirm eligibility. There's no way they can check someone's intentions.

                • @bobbified: @bobbified

                  I don't think failure to realise will be an acceptable excuse.

                  Also some info here.


                  • @sir_bazz: Failing to realise what?

                    I don't think you're understanding what I'm saying. The intention of the early access is to help in these tough times. If you withdraw the money and find that you don't use it, you're entitled to contribute it back. There are no ifs and no other buts.

                    • @bobbified: I don't think you quite comprehend with jimbobaus is stating. He's not saying you can't do it. He/She's saying you shouldn't or there may be consequences.

                      ATO will investigate. They are relentless. Their jurisdiction and powers are reverse onus. YOU have to prove you're innocent. They don't have to prove you're guilty. They can make your life a living hell.

                      You can go ahead with what you're planning. Just remember they you might get a call or letter down the track and then the fun and games begin for you.

                      Also check that your employer actually has the right to cut your hours and wages. There is specific circumstances and criteria in which they can do this (unless you provided consent?).

                      • @zeggie: There's a lot of things that shouldn't be done. I shouldn't cross the road when there isn't a pedestrian crossing either. because there maybe consequences.

                        See those empty threats to all those people who were buying and reselling toilet paper and sanitiser at inflated prices? "Rawwwrr, we will get you!!" How many people did they get?

                        Truth is, they could easily close that loophole if they wanted to. The fact that they don't shows that it's not high on their priority list at all.

                        • @bobbified: Cool. At least you're going in with your eyes open. You have been told the risks. Have fun!

                          • @zeggie: I've dealt with these things enough times. Like I said earlier, it's not the first loophole in these ill-thought laws and it won't be the last. Ive been in the industry way too long and I've made good use of them before.

                            Except, I'm not eligible this time!

              • @jimbobaus: I haven't seen the duplicate, mind sending or posting a link to that?
                So far as I said what I have seen is about as Crystal Clear as Scomo's addresses and I'm looking for more certainty as it is, it's perfectly legal unless I can see otherwise.

      • Source?

    • I would do it myself, but I'm ineligible.

      edit: Apparently they've done a vague hand wavy thing to say they're going to crack down on it, but there's no rule explicitly prohibiting this except that you're not allowed to run a "tax avoidance scheme". The fact that almost every multinational company operates out of a tax haven shows the hypocrisy of that statement.

      • Precisely. Would love to see something solid but that would mean legislation and debate, as you said that opens up cans of worms for the feds.

    • I have been told by my employers that everyone in the company will be taking 20% paycut and only work 4 days a week starting from May.

      Well thats not a paycut as such, you're hours worked are being reduced by 20%, a 20% paycut would mean you still working 5 days a weeek.

      Should I do it ?

      Who cares what I think, the risk is yours. But if the gov closes the loophole and you get 'caught' that risk is on you.

    • No. ATO has been alerted and will issue something on this.

      This can potentially fall under Part IVA (anti-avoidance provision of Australian income tax law).