FAQs Super Early Release SMSFs

FAQs on Super Early Release for SMSFs $10k Coronavirus

Due to the large number of inquiries we’ve received on this topic, we’ve put together some FAQs on Super Early Release for SMSFs to provide quick answers to key questions about the $10,000 Coronavirus early release of superannuation.

When & how do I apply for for the $10,000 super payment?

When: You can apply from 20 April 2020.

How: Applications are made to the ATO via myGov.

The application process is the same for everyone including members of SMSFs.

Update from the ATO 30/03/2020 – CRT Alert 004/2020

How long will it take my super fund to pay the $10,000?

This is unknown. It could take anytime from a few days to a few weeks.  The ATO as well as the super funds are currently building the systems to enable these payment requests to be processed and paid.

Update from the ATO 27/03/2020:

  • There is currently no set timeframe for when the money is released to the individual, however under the compassionate release measure; the regulations require payment to be made to the individual as soon as practicable and funds cannot require members to submit an application to the fund, releases are to be made based on the ATO determination.

Once the application is made via myGov, the ATO will issue a determination to the superannuation fund (including an SMSF) on the individuals eligibility to receive the payment.

Super funds – including SMSFs – are only allowed to make the payment once they’ve receive this determination from the ATO.

Are the temporary early release changes now law?

Yes. The Coronavirus Economic Response Package Omnibus Bill 2020 received Royal Assent on 24 March 2020.

When can the second payment be made?

After 1 July 2020.

Can my SMSF release the $10,000 early release payment to me now?

No.  SMSF trustees, like all other superannuation funds, MUST wait until the ATO has issued the determination authorising the release of the $10,000 payment. SMSF members must also apply through myGov.

Specifically, the ATO has issued the following on their website 25/03/2020:

Trustee responsibilities for early release of super

As an SMSF trustee, you are responsible for your and your members’ retirement savings. Please make sure you are eligible for early release of super before you release any funds from your SMSF. Source: https://www.ato.gov.au/Super/Sup/Government-s-COVID-19-economic-response-assists-SMSFs-and-their-members/

We expect SMSF auditors to report any early / premature payments that occur BEFORE the issue of the ATO determination for the member, although whether the ATO will dedicate compliance resources when the ATO determination / release authority is subsequently issued to the SMSF (i.e. it’s rectified) is unknown.

It’s worth noting that administrative penalties for early release, financial assistance or lending to members of the SMSF would likely me more than $10,000 if issued to SMSF trustees. We understand the economic, business and personal stresses resulting from the COVID-19 pandemic are extreme. If you are an SMSF member and desperately require this payment, please contact us to discuss you situation.

Am I eligible for the $10,000 Coronavirus early release super payment?

To apply for early release you must satisfy anyone or more of the following requirements:

  • you are unemployed; or
  • you are eligible to receive a job seeker payment, youth allowance for job-seekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
  • on or after 1 January 2020:
    • you were made redundant; or
    • your working hours were reduced by 20 per cent or more; or
    • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.

People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

Update from the ATO 27/03/2020:

  • Australian citizens and permanent residents are eligible to apply;
  • New Zealand citizens with Australian held super are eligible;
  • Temporary residents are not eligible

My salary has been reduced by 20% (or more) however hours have not reduced.  Am I eligible?

Our initial reading of the law suggests that if a salaried employee’s pay was reduced by 20% they would not qualify for early release. The legislation only makes reference to working hours being reduced after 1 January 2020.
Please refer to the Government’s early access to superannuation fact sheet (PDF).

I operate my business through a partnership, family trust or company. Am I eligible?

We believe that the early release will be able to apply if you are able to satisfy one of the below requirements due to the COVID-19 economic impacts:
  • you are unemployed; or
  • 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; or
  • on or after 1 January 2020:
    • you were made redundant; or
    • your working hours were reduced by 20 per cent or more; or
    • if you are a sole trader —your business was suspended or there was a reduction in your turnover of 20 per cent or more.

If you paid via partnership drawings, trust distributions, dividends or directors fees from your business, it may be difficult to meet the above eligibility criteria.

It may be possible to be eligible by showing your working hours have reduced by 20% of more, but each individual will need to make this assessment.  We will know more when the application is made available via myGov from the 20th of April 2020.  There is likely to be an element of self-assessment.

It is also important to consult with your accountant as they will be able to assist you in what you can do and what additional Government support initiatives are available to you.  If you want further information on the other supports available for your business, please visit the Quill Accounting website: COVID-19 (Quill is our parent company).

My partner has lost their job but is ineligible for Centrelink benefits such as the job seeker payment. Can they access the $10,000 super early release payment?

Yes. Refer to above eligibility criteria re unemployment / redundancy.

My partner is eligible for the payment, however they have nothing in super.  Can I pull out my super on their behalf?

No. You are unable to pull out your super early if you are not eligible.

One option might be to look at a contributions split.  An individual can apply to have 85% of their concessional contributions (e.g. SGC, employer contributions, salary sacrifice etc) transferred to their spouses super account.

For example if an individual received $10,000 in contributions in the 2019 financial year, they have until 30 June 2020 to apply to have $8,500 transferred to a nominated super account in the name of their spouse.  This amount is then available to be withdrawn early if the spouse is eligible for early super release.

More information here: ATO – Contributions Splitting

Will an SMSF be required to issue a PAYG lump sum payment summary for the $10k early release payment?

Unlikely. As the SMSF would have no withholding obligation it follows that the reporting obligations to the ATO and to the payee should also not apply. The ATO will clarify the required process.

Does the SMSF trust deed need to be updated to enable the payment to be made?

Possibly.

If it’s a good quality trust deed like the ones used by Superfund Partners, no amendment will be needed as our preferred deeds include a provision for amounts of be released when a member “satisfies any other condition of release permitted by the Law”.

If your SMSF trust deed is older or very restrictive, poorly drafted, its possible it will not contact a specific rule or provision which enables this early release, therefore would need to be updated. Superfund Partners can review your SMSF trust deed to ensure it enables the $10,000 temporary early release payment.

Eligibility Example 1 – Employee impacted by reduced working hours:

Ed works in a popular bar in Melbourne. As a result of the Coronavirus, Ed has had his work hours reduced from 40 hours on average in the second half of 2019 to 20 hours per week on average in May 2020.  As a result, Ed determines that his hours over the last month have reduced by more than 20 per cent compared to the average of his hours over the last six months of 2019.

Ed decides to apply for the early release of $8,000 of his superannuation in May 2020 to help pay his rent and other living expenses. Ed self-certifies that he is eligible for early release on myGov. He could have applied for up to $10,000, but chose not to. Ed cannot seek any further early release of superannuation in 2019-20 on the grounds that he has been affected by the adverse economic effects of the Coronavirus.

However, Ed finds after 1 July 2020 that his hours continue to be reduced by more than 20 per cent compared to the average of his hours in the last six months of 2019. Ed decides to make a second application and self-certifies through myGov that he is eligible for early release. He is able to apply again for a release of up to $10,000 of his superannuation. Ed submits a second application for the full amount of $10,000 this time.

For each application, the ATO approves Ed’s early release and notifies both him and his superannuation fund. Ed has received a total of $18,000 of his superannuation in two separate payments. He will not be taxed on this amount and is free to spend this money on anything he chooses, or save it for future expenses. He is also free to recontribute any unused amounts to his superannuation in the future (within his contribution caps).

Eligibility Example 2 – Sole trader

Rachael is a sole trader with a catering business. At the end of July 2020, Rachel seeks to apply for an early release from her superannuation for the 2020-21 financial year. 

Due to the economic effects of the coronavirus, Rachael’s turnover for July is $5,000 compared to $10,000 on average per month for the second half of 2019. Rachael therefore determines that her turnover has reduced by more than 20 per cent compared to her average turnover over the last six months of 2019.

Rachael self-certifies that she is eligible for early release and applies to have $10,000 released from her superannuation.

COVID-19 economic response package – early release of super

Update from the ATO 30/03/2020 – CRT Alert 004/2020

Application process for individuals

On Monday 20 April, the ATO will be deploying the application form for individuals to use for COVID-19 early release of super. From that date, individuals will commence applications.

An individual can make one application in the 2019–20 financial year and one application in the 2020–21 year prior to 24 September 2020, when the measure ends.

The application is accessed in one of two ways:

  1. The member authenticates themselves through myGov and is able to complete the application form in ATO Online.
  2. For those who are unable to access online services, the individual will be able to call the ATO, confirm their identity and complete the application over the phone.

The application requires the person to certify that they are eligible and includes information about the consequences of making false applications.

The individual then proceeds to:

  • review a list of open accounts they have and the last account balance reported for that account (in most cases that is 30 June 2019)
  • input the amount they would like to release from each account (there are no limitations on what the individual can input only that in total the amount can’t exceed $10,000)
  • input the bank account details (account name, BSB and number) they would like the money paid into
  • authorise the ATO to provide it to the super fund and that the super fund release the money into that account.

Coronavirus – early release of superannuation industry consultation 24 March 2020

The following key discussion points have been released by the ATO as at 27 March 2020:

  • The Coronavirus Economic Response Package Omnibus Bill 2020 Link passed the House of Representatives on 23 March 2020 and received Royal Assent on 24 March 2020.
  • The design and implementation of the Coronavirus – Early release of superannuation changes will leverage off the existing Compassionate Release process.
  • The legislative requirements come into effect from 25 March 2020 (with applications able to be lodged from 20 April 2020) and will remain in place until 24 September 2020.
  • The changes will allow eligible employees to submit two applications for up to $10,000 each from their Superannuation fund, one application in the current 2019–20 financial year and one in the 2020–21 financial year.
  • Applications can be made up to 30 June 2020 for this financial year and from 1 July 2020 until 24 September 2020 for the next financial year.
  • A large volume of applications, in excess of 3 million are expected, given the current COVID-19 (coronavirus) impacts on the community.
  • Individuals will be required to apply via MyGov as the primary channel; however a manual option will be available for those who can’t transact online. An ATO system build is underway for applications to be electronically processed.
  • The ATO will deploy both the electronic and manual (phone) solution 20 April 2020.
  • The fund will receive a digitised determination regardless of the application being submitted online or manually.
  • Australian citizens and permanent residents are eligible to apply for the scheme. New Zealand citizens with Australian held super are also eligible. Temporary residents are not eligible.
  • The application process is mostly self-assessed. The ATO will manage the eligibility criteria with strict guidelines and messaging for individuals to accurately assess their eligibility. There will also be warnings about penalties for making false and misleading statements to deter inappropriate use.
  • There will be appropriate checks in place to identify and reject duplicate applications and the ATO will be able to undertake post-issue compliance work based on data and other information held in ATO systems.
  • The ATO will follow-up any potentially false or misleading declarations.
  • The ATO online form will display all superannuation accounts (matched from MAAS – Member Account Attributable Service) a fund has for an individual. The member can then elect to claim a portion of each account up to the value of $10,000 – for example, $5,000 from one fund and a second $5,000 from another fund.
  • Where a member makes an application and the fund has insufficient money to fulfil the application, the member will not be able to make a second application for the balance from another fund/account in that financial year. They will also not able to seek the balance in the 2020–21 financial year above the $10,000 cap.
  • Members will be encouraged to check their account balances with their fund to identify if there are sufficient funds available to claim.
  • Appropriate messaging will be included on the application form to ensure individuals supply the correct bank account information.
  • The fund notifications will be delivered using the current system design via the BDE (Bulk Data Exchange) solution. The final form of the notifications is being worked on (for example, individual notices for each member or a bulk file upload such as a spreadsheet). In either case, funds should ensure they check for notifications daily.
  • The ATO will engage further with funds regarding data file requirements.
  • With the 20 April 2020 commencement date, the ATO will consider the impacts of money that is already in transit due to USM (Unclaimed Super Monies) reporting.
  • There is currently no set timeframe for when the money is released to the individual, however under the compassionate release measure; the regulations require payment to be made to the individual as soon as practicable and funds cannot require members to submit an application to the fund, releases are to be made based on the ATO determination.
  • APRA to provide guidance on the expectation around the checks to be made by funds before releasing the money – for example, proof of identity.
  • If the application is rejected, the member will be notified via their MyGov account in 2-3 days.
  • There needs to be clear and consistent messaging and communications across all impacted government agencies and funds.
  • The ATO will share with industry the approval and rejection letters when available, as well as FAQs and other relevant communication messaging.

Other frequently asked questions on Super Early Release for SMSFs

If there are other questions not answered in this article, please get in touch via the chat function and ask us.

You may have searched for the following questions to find this article:

  • How do I apply for the $10,000 early release payment from my SMSF?
  • Am I eligible to make a $10,000 early release payment from my SMSF?
  • I operate in a partnership am I eligible for the $10,000 superannuation early release payment?
  • I operate through a company am I eligible for the $10,000 superannuation early release payment?
  • I operate through a family trust am I eligible for the $10,000 superannuation early release payment?
  • Do I need to upgrade / amend my SMSF trust deed to make the $10,000 early release super payment?
  • SMSF early release
  • SMSF Coronavirus (COVID-19)
  • SMSF $10,000 superannuation early release payment
  • Is the $10,000 superannuation early release payment taxable?
  • Where is the superannuation early release payment application on myGov?
  • When can I apply for the $10,000 early release payment from my super fund?
  • I have an SMSF can I self-assess the $10,000 early release payment?
  • My husband / wife / spouse / partner has $0 super balance no super – can I also withdraw $10k for them?
  • Is a Temporary resident eligible for $10,000 early release of superannuation COVID-19?
  • Is a New Zealand resident eligible for the $10,000 early release of superannuation COVID-19?
  • How long will it take my super fund to pay the $10,000 early release of superannuation COVID-19?

 

mm

SMSF Specialist at Superfund Partners. I love working in the SMSF space. Self-managed super funds are more than just a savings vehicle - they enable people to truly take control of their financial situation which is key to achieving happiness. I can assist with SMSF setup, SMSF tax and accounting, SMSF pensions and ensure SMSF investments comply with the SMSF laws and regulations.