Covid-19 – Temporary Early Access to Superannuation

In response to the economic consequences of the Covid-19, yesterday (22 March 2020) the Government announced Special access to existing superannuation balances will be available to those who have experienced significant reductions in their income, are unemployed or who have been retrenched.

Eligibility

Members will be eligible for the early access if:
• They are unemployed,
• They were made redundant,
• They had their working hours or salary reduced by 20% or more, or
• for sole traders, their business was suspended or there was a reduction in their turnover of 20% or more.

There are no income or assets tests.

Eligibility will likely be via comparison of existing circumstances to the average for period pre 31 December 2019

Amount able to be accessed

Eligible individuals will be able to access up to $10,000 before 1 July 2020.

A further amount of up to $10,000 will be available from 1 July 2020

Only one payment will be permitted in each financial year.

Payment Process

Generally NON-SMSF members will apply via their MyGov Account.

It is likely a different process will be followed for SMSF members. More information will be available on the ATO website in due course.

It is critical that SMSF members wait until the rules are in place and understand and follow the process.

Unlike non-SMSF Members, SMSF members have easy direct access to this money but anyone who simply withdraws money from their SMSF now, or even after mid April but does not follow the right process, or subsequently finds they do not meet the eligibility criteria will be subject to the usual substantial tax and other penalties for unauthorised withdrawal.

Timing of Payments

Applications will be able to be made from mid-April 2020.

We assume that once approved the SMSF can make the payment immediately

Tax Implications

Amounts released to eligible members under this temporary measure will be tax free and will not affect Centrelink or Veterans’ Affairs payment eligibility

SMSFS paying income streams

If the income stream is a transition to retirement with a set maximum then this will allow those members to access more than the maximum.

For other income stream members there may be no need to changes as they can simply increase the pension payments.

How can SuperNova help?

Supernova will keep you up to date with any more information as it comes to hand

Once the process and documentation requirements are in place we will assist our clients prepare the fund withdrawal documentation for their SMSF clients.

If, due to the Corona Virus you are short staffed and under financial pressure, please feel free to contact me for assistance during this difficult time.

We are always available if you have specific questions regarding your SMSF Clients