COVID-19 economic response package – early release of superEditor: If you have been financially affected by COVID-19, you may be able to access some of your superannuation early.
Eligible citizens and permanent residents of Australia or New Zealand can apply for up to $10,000 in 2019–20 and up to a further $10,000 in 2020–21.
Eligible temporary residents are able to apply once to access up to $10,000 of super in 2019–20.
Applications can be submitted online through myGov:
You will not need to pay tax on amounts released and will not need to include these amounts in your tax return.
Citizens and permanent residents of Australia and New ZealandTo be eligible for early release of super, a citizen or permanent resident of Australia and New Zealand must be in one of the following circumstances:
On or after 1 January 2020 either:
Temporary residentsTo be eligible for early release of super, temporary residents must be in one of the following circumstances:
Assessing your eligibilityYou do not need to attach evidence to support your application. However, you should keep records and documents to confirm your eligibility as the ATO may ask you for this information.
It is important that you assess your eligibility accurately. The ATO is administering this measure on behalf of all Australians and will manage the eligibility criteria with strict guidelines to ensure the government can support those financially affected by COVID-19. There are penalties for making false and misleading statements.
You can’t access your super early for a dependant. If your dependant is financially affected by COVID-19, they must apply themselves.
You can only submit one application for COVID-19 early release of super per financial year. You are still able to apply for COVID-19 early release of super if you have previously accessed your super early in other circumstances.
Implications of accessing your super earlyAccessing your super early will affect your super balance and may affect your future retirement income.
Withdrawing superannuation may also affect your:
Insurance may not be available on accounts that:
You should consider whether you need to seek financial advice before submitting your application for early release of super.
Before you applyBefore you start the application process, you should:
There are four ways you can check your super balance:
Submit an applicationApplications for early release of superannuation are accepted through ATO online services via myGov.You can only submit one application for COVID-19 early release of super in each financial year:
This is even if the total amount you request to be released, or the actual amount released by your fund, is less than $10,000. For example, if you request $8,000, you cannot make another application to request the additional $2,000.The application form on myGov will display all your superannuation accounts, as reported to the ATO by your funds. You can request the release of your super from up to five super accounts. For example, if you want to receive a total of $10,000 you can request $5,000 from one fund and a second $5,000 from another fund. This must be done within one application form.
Current super balanceWe encourage you to check your fund’s online portal to confirm your current accurate balance. Your current super balance may be lower or higher than what is shown in the application form. The amount shown in the form is the amount last reported to the ATO and your fund does not need to report your current balance to the ATO.
You can apply for an amount higher than the balance shown in the application form (up to $10,000), provided your current balance is sufficient. This includes if a ‘nil’ amount is showing in the application form. For example, if you’ve confirmed your fund balance is $8,000, but the amount showing in ATO Online is $0.00 you can still apply for a release up to $8,000.
If you apply for an amount greater than your current balance, your fund will release the amount currently available (up to $10,000). For example, if you request $8,000, but your current balance is only $7500 your fund will release $7500.
Application tipsYou can only submit one application for COVID-19 early release of super per financial year. To make the application process as smooth as possible, please check the following information is correct before you submit your application:
You can’t access your super early for a dependant. If your dependant is financially affected by COVID-19, they must apply themselves.An application can’t be withdrawn or cancelled once it has been submitted. If you no longer want the release of your super, you will need to contact your fund.
After you applyIt will take the ATO up to four business days to process your application and send you a letter of approval or rejection to your myGov Inbox.Once your application is approved you do not need to contact the ATO or your fund. Your fund will make the payment to you without you needing to apply to them directly. The Australian Prudential Regulation Authority (‘APRA’) have issued guidance to super funds and expect payment to be made to members within five business days. However, this time may increase where funds need to contact you to clarify information.If your fund is a SMSF, you will need to let them know that you have received the determination so they can make the payment to you.Ref: ATO website, COVID-19 early release of super
COVID-19 and Superannuation– ATO answers your questionsEditor: The ATO has provided answers to pressing questions of SMSF trustees and their advisers, relating to various matters brought about by the COVID-19 pandemic. Some of the more pertinent questions (and answers) are provided below:
Related party limited recourse borrowing arrangement reliefQuestion: My SMSF has a compliant limited recourse borrowing arrangement (‘LRBA’) in place with a related party. Would the non-arm’s length income (‘NALI’) provisions apply if the related party offers repayment relief to the SMSF trustees because of COVID-19?
Answer: The ATO understands that temporary repayment relief may be offered in relation to an existing LRBA between an SMSF and a related party due to the financial effects of COVID-19.
If the repayment relief reflects similar terms to what commercial banks are currently offering for real estate investment loans as a result of COVID-19, the ATO will accept the parties are dealing at arm’s length and the NALI provisions do not apply. For example, these terms currently include temporary repayment deferrals for most businesses of up to 6 months, with unpaid interest being capitalised on the loan.
The parties to the arrangement must also document the change in terms to the loan agreement and the reasons why those terms have changed. It is also expected that there is evidence that interest continues to accrue on the loan and that the SMSF trustee will catch up any outstanding principal and interest repayments as soon as possible.
Any further repayment relief needed due to the continued effects of COVID-19 should be reviewed at the end of the agreed deferral period and remain in line with what the commercial banks are offering at that time.
Temporarily reducing superannuation minimum payment amountsQuestion: I am retired and receive an account-based pension from my SMSF. My account-based pension balance has been badly affected by the losses in the financial market because of the COVID-19 crisis. I would like to reduce my pension payments. Does the SMSF still need to pay me the minimum amount that was calculated based on my account balance at 1 July 2019?
Answer: No. You can reduce the minimum amount your SMSF pays you by up to 50% of what is otherwise required based on your account balance at 1 July 2019 for the 2019– 20 financial year. Certain superannuation pensions and annuities are subject to rules about minimum and maximum amounts paid in a financial year. To assist retirees, the government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% in the 2019–20 and the 2020–21 financial years.
Question: I am retired and receive an account-based pension from my SMSF. My account-based pension has already paid me more than the reduced minimum annual payment required for the 2019–20 financial year. Is my SMSF required to continue making pension payments to me for the remainder of the year?
Answer: If a member does not want to receive any further pension payments they can cease being paid the pension for the remainder of the year. This has to be communicated to the Trustee. It is important that the SMSF trustee considers its trust deed and documents any changes and the reason for the change. This could be recorded in a minute or other contemporaneous document.
Question: I am retired and receive an account-based pension from my SMSF. My account-based pension has already paid me more than the reduced minimum annual payment required for the 2019–20 financial year. Is the amount over the minimum treated as a superannuation lump sum amount?
Answer: Pension payments that you have already received cannot be re-categorised. Accordingly, payments made from your account-based pension in excess of the new reduced minimum annual payment required for the 2019–20 financial year are pension payments (that is, superannuation income stream benefits) for the year and not superannuation lump sums.
Question: I am retired and receive an account-based pension from my SMSF. Does my SMSF trustee need to document a reduction in my pension payments if it occurs in accordance with the reduced minimum annual payment for the 2019–20 and 2020–21 financial years?
Answer: Yes, it is important your SMSF trustee documents the change and the reason for the change. This could be recorded in a minute or other contemporaneous document.
Providing rent reliefQuestion: My SMSF owns real property and wants to give my tenant – who is a related party – a reduction in rent because of the financial effects of COVID-19. Charging a related party a price that is less than market value is usually a contravention. Given the effects of COVID-19, will the ATO take action if I do this?
Answer: Some landlords are giving their tenants rent relief as a rent reduction, waiver or deferral because of the financial effects of COVID-19. The ATO’s compliance approach for the 2019–20 and 2020–21 financial years is that it will not take action if an SMSF gives a tenant – even one who is also a related party – a temporary rent reduction, waiver or deferral because of the financial effects of COVID-19 during this period.
If an SMSF holds an interest in an interposed entity such as a non-geared company or unit trust and that interposed entity leases property to a tenant, the ATO will not treat the investment in the interposed entity as an in-house asset for the current and future financial years as a result of a deferral of rent being provided to the tenant due to the financial effects of COVID-19.
If there are temporary changes to the terms of the lease agreement in response to COVID-19, it is important that the parties to the agreement document the changes and the reasons for the change. You can do this with a minute or a renewed lease agreement or other contemporaneous document.
In-house asset restrictionsQuestion: The downturn in the share market may result in the fund’s in-house assets being more than 5% of the fund’s total assets. The in-house asset rules would be breached. What do I need to do?
Answer: If, at the end of a financial year, the level of in-house assets of an SMSF exceeds 5% of a fund’s total assets, the trustees must prepare a written plan to reduce the market ratio of in-house assets to 5% or below. This plan must be prepared before the end of the next following year of income. If an SMSF exceeds the 5% in- house asset threshold as at 30 June 2020, a plan must be prepared and implemented on or before 30 June 2021. However, the ATO will not undertake compliance activity if the rectification plan was unable to be executed because the market has not recovered or it was unnecessary to implement the plan as the market had recovered.
Investment strategiesQuestion: The downturn in the market has affected my SMSF’s investment strategy. What do I need to do?
Answer: Trustees must prepare and implement an investment strategy for their SMSF, which they must then give effect to and review regularly. The strategy should be reviewed at least annually, and you should document that you’ve undertaken this review and any decisions arising from the review. Certain significant events, such as a market correction, should also prompt a review of your strategy and may require updating your investment strategy.
If the assets of an SMSF or the level of investment in those assets fall outside of the scope of your investment strategy, you should take action to address that situation, which could involve adjustments to investments or updating your investment strategy. The ATO does not consider that short term variations to your articulated investment approach, including to specified asset allocations whilst you adjust your investments, constitute a variation from your investment strategy.
All investment decisions must be made in accordance with the investment strategy of the fund. If in doubt, trustees should seek investment advice.Ref: ATO website, Self-managed super funds – Frequently Asked Questions, Updated 23 April 2020