As the Australian government continues to release measures designed to reduce the financial impact of COVID-19 and associated social distancing – some of these directly relate to your super and roles as SMSF Trustees & Members.
Below is some commentary around relevant topics
Early Access to Superannuation:
This was announced in one of the early rounds of stimulus measures. Eligible individuals will be able to apply for payments from superannuation to assist with financial hardship. While this is available, it has generally been considered an option of last resort.
They key points are as follows:
- Eligible individuals will be able to apply for up to $10,000 from their superannuation fund both in the 2019/20 financial year and again in the 2020/21 financial year. Eligibility includes
- You must be unemployed; or
- You must be 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; or
- On or after 1 January 2020:
o you were made redundant; or
o your working hours were reduced by 20 per cent or more; or
o if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.
The application for this must be done on mygov. Unfortunately, the policy has not made any provision for support by financial advisers even where your super is manager under an existing investment plan. The application will be made to the ATO and they will provide release instructions direct to the fund trustee who will make the withdrawal/payment without necessarily having consideration about which assets or where the funds are paid from.
Temporary Rent Reduction:
Many SMSF’s have in place a strategy whereby they own business real property. Quite often the case is that this real property is leased to a related party operating a business from the premises.
Questions have been raised about what the implications are for the SMSF should they either reduce the rent payable below current market rates, or even provide the tenant with a rent free period during the financial impact of the COVID-19 restrictions. Ordinarily, providing this kind of accommodation would be a breach of the Superannuation rules.
Guidance from the ATO is that they won’t be seeking to take action where a SMSF implements the reduced rent or rent waiver strategy during the 2019/20 and 2020/21 financial years. Obviously, it is incumbent on the SMSF trustees to make an appropriate assessment as to whether the reduction in warranted based on each individual set of circumstances.
In-House Asset Restrictions:
Generally, if a fund holds in-house assets that exceeded 5% of the asset value of the fund, this will constitute a breach of the superannuation rules.
For reference, an in-house asset includes:
- an investment in a related party of the fund;
- an investment in a related trust (exclusions apply for certain non-geared trusts that hold property and trusts that were established prior to 12 August 1999);
- loans to related parties (excluding loans to members and relatives which are prohibited); and
- assets subject to a lease, or lease arrangement to a related party, other than collectable and personal use assets as identified in the SIS Regulations.
The ATO have confirmed that if an SMSF has in-house assets that exceed the 5% valuation as at 30 June 2020, then the SMSF MUST still prepare a written plan to reduce the assets below 5% by way of disposal by the following 30 June. However, the ATO have indicated that they will not take compliance action if the plan was not implemented under the following circumstances:
- Plan unable to be executed because the market had not recovered; or
- Plan unnecessary to be implemented due to market recovery i.e. asset now below 5%.
Published : 31 Mar 2020