In response to calls from the industry, the Federal Government has announced a second tranche of economic stimulus measures, this time in the form a ‘safety net’ for those negatively impacted by the consequences of COVID-19.
These changes include two important superannuation announcements.
Let’s have look at the second measure –
Temporary Early Access in Superannuation
The conditions for releasing superannuation on ‘compassionate grounds’ or in the case of ‘severe financial hardship’ are notoriously narrow.
Given the pressure many are experiencing in the wake of COVID-19, the Government has introduced a new temporary opportunity that will allow impacted persons to access $10,000 from their superannuation.
While legislation is yet to follow, key facts are available for this measure, including eligibility, tax treatment of the payment, and the process to apply for withdrawal. The Government Fact Sheet can be found here.
Who is eligible?
A person (including a business owner) will be eligible for this relief if:
- they are unemployed; or
- they are eligible to receive a job seeker payment, youth allowance, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
- on or after 1 January 2020:
- they were made redundant; or
- their working hours were reduced by 20 per cent or more; or
- if they are a sole trader — their business was suspended or there was a reduction in turnover of 20 per cent or more.
It is anticipated that the 20 per cent reduction will be measured by comparing current turnover or current hours with the relevant average for the period from 1st July 2019 to 31st December.
I am already receiving a Commonwealth income support payment. Will I qualify?
If you satisfy one of the above conditions, yes. Eligibility is not affected by any other payment you receive. There is no waiting period. You can apply as soon as the rules come into effect (which should be the middle of April – see below).
I am a high income earner, but am being impacted by COVID-19. Will I qualify?
If you satisfy one of the above conditions, yes. There is no income or assets test linked to this early access opportunity. Obviously higher income earners may have less need to access their super – but you can if you choose to do so.
How much can I access?
Eligible persons may access up to $10,000 prior to 1 July 2020.
A further $10,000 may also be accessed during the 2020/21 financial year – but only for approximately three months after 1 July 2020. We are waiting on legislation to confirm exact timing.
How do I apply?
If you are a member of an SMSF and are eligible, the procedure to obtain the released amount is as follows:
- Apply directly to the ATO via myGov.
- Once the ATO has processed your application and confirmed your eligibility, they will provide your (as the fund member) with a determination.
- As the member, you must provide this determination to the SMSF trustees (ie yourself – SMSF trustees are used to writing themselves letters!) Once the trustee holds this determination, they may release the benefit from your SMSF and make this payment to the member.
How is the benefit taxed?
Amounts released under the relief will be tax free to the individual and will not affect eligibility for Centrelink or Veterans’ Affairs payment.
What are the SMSF audit ramifications?
Your SMSF auditor will ask to see the following:
1. The ATO determination authorising release of the benefit;
2. Fund correspondence relating to the event, namely the member’s request to receive the benefit in line with the determination and the trustee’s consent to release the funds.