You may be aware that the Government recently announced measures which allow individuals affected by the economic impacts of COVID-19 to access a limited amount of their superannuation early.
Making the decision to access your superannuation early is a significant one and if possible, should be encompassed by financial advice. The Australian Taxation Office have now released guidance on the process for accessing superannuation early from SMSFs to assist in cushioning the adverse economic effects of Coronavirus.
How much from your SMSF can you withdraw?
You will be able to apply online through the myGov website to access up to $10,000 of your super from 1 July 2020 until 24 September 2020.
You will only be able to make one request. For example, should you nominate for a lesser withdrawal amount, you will not be able to apply again nor will you be able to apply for more than $10,000.
If you access your superannuation you will not be required to pay tax on amounts released and any amounts withdrawn will not affect your Centrelink or Veterans’ Affairs payments. These amounts will also not be included in your assessable income for the financial year the withdrawal is made.
Satisfying early release requirements
The intention of the legislation is that you are adversely affected by the economic impacts of COVID-19 and require early access to your superannuation which is ordinarily preserved until your retirement.
To apply for early release of your superannuation, 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.
These are the only requirements that must be considered.
How to apply to access your superannuation
You can register your interest to access through the myGov website.
If you satisfy one or more of the requirements entitling you to access your superannuation early, you will be able to do so from mid-April.
After applying through myGov, the ATO will issue you with a determination to release an amount. Only once your SMSF receives the determination from you, will the trustee be authorised to make the payment. If you apply to access superannuation benefits from a non SMSF, the determination will be issued by the ATO direct to the APRA regulated funds and the trustee will proceed to release your benefits to a nominated bank account.
What are the risks?
First and foremost, superannuation is meant to be a long term investment to financially support you in retirement. Withdrawing an amount early can have a serious impact on your potential retirement balance and income.
Secondly is the eligibility. It has widely been assumed that the ATO is making an assessment to confirm your application meets the criteria – this is not true. By lodging the application to access your superannuation, you are confirming you have self-assessed your situation and meet the strict requirements. This is especially true when you are also a trustee of the SMSF – as you will also have the duty to ensure any withdrawal is in requirement with the SMSF Deed and applicable laws.
I recommend anyone proceeding with the early release ensure they have suitable paperwork to back up their eligibility to provide for the annual SMSF audit before making the application for the release.
Other ways to access superannuation
You may be allowed to withdraw some of your super due to other reasonings, such as
- Access on compassionate grounds
- Access due to severe financial hardship
- Access due to a terminal medical condition
- Access due to temporary incapacity
- Access due to permanent incapacity
- Your super balance is less than $200
I would recommend getting in touch with me to discuss your specific circumstances in more detail to ensure you aren’t breaching any regulations.
How can we help?
If you need assistance with the early access of your superannuation or whether this is the right action for you and your specific circumstances, please feel free to give us a call on 1300 392 544 or get in touch online so that we can discuss in more detail.