Superannuation Impacts from COVID-19
The impact from the current COVID-19 crisis is being felt across Australia and the world, and superannuation is not immune. In light of the effect on not only individual’s superannuation balances, but also their businesses and personal situations, the following superannuation measures have been announced:
Reduced Pension Minimums
Due to the fact many retirees have had their super balances significantly reduced, the minimum pension drawdown rates have been halved for the 2019/20 and 2020/21 financial years. This is similar to the measures taken during the Global Financial Crisis and means retirees will not be forced to sell assets in a depressed market to fund pensions. If payments have already been taken during the year exceeding the reduced minimum requirement, then they cannot simply be refunded to the superannuation fund. Instead, the usual contribution limits and restrictions would apply to any monies being put into superannuation.
Early Access to Superannuation
To assist people who have been adversely affected, the Government has announced measures to allow them to access a limited amount of their superannuation which would normally be preserved until their retirement.
To be eligible to apply for an 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, any of the following happened:
- You were made redundant
- Your working hours were reduced by 20% or more
- You were a sole trader and your business was suspended or your turnover decreased by 20% or more
Applications can be made online from 20 April 2020 via the myGov website and can be for up to $10,000 before 1 July 2020, with a further amount up to $10,000 able to be applied for between 1 July 2020 and 24 September 2020. For SMSF members it is important to note that benefits cannot be withdrawn until the fund has been notified by the Australian Taxation Office (ATO). There will be no tax payable on released amounts and they will not form part of an individual’s assessable income.
Whether someone should access this will depend on their personal circumstances and advice should be obtained. The ATO has indicated that it will be a “self-assessment” mechanism and no evidence will be required upon application, but records should be maintained to confirm eligibility. Care should also be taken when balances are small so that insurance cover isn’t inadvertently lost due to inability to cover premiums.
Rent Relief for Related Parties
It is a common strategy for SMSFs to own commercial property which is then leased to the member’s business. While these related party tenancies are allowed, they must be maintained on an arm’s length basis and must be done for the sole benefit of the member’s retirement. However, in the present climate, many tenants are seeking rent relief from landlords due to a downturn in the business and cashflow. SMSF Trustees have been wondering whether they are also able to provide this option to related party tenants. The ATO has now confirmed that they will not be taking any compliance action in the 2019/20 and 2020/21 financial years against SMSFs which undertake this. However, it is important that the relief is only temporary so this would need to be considered and a strict timeframe placed on any arrangement. It would also be prudent for Trustees to be documenting the reasoning as to why the decision was made, length of relief and amount the reduction is.
Further superannuation announcements may be forthcoming but with the global and national situation changing rapidly, it is important to always seek advice about your personal situation. For assistance considering your eligibility and support in preparing and lodging applications, please contact your usual Mazars advisor, or alternatively contact one of our superannuation specialists:
Brisbane – Clive Todd
Melbourne – Michael Jones
Sydney – Dean Newman
+61 7 3218 3900
+61 3 9252 0800
+61 2 9922 1166
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.
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