fbpx

1800 951 855

[email protected]

Register?

LOGIN

All posts by accelr8

  • Home   /  
  • Articles posted by accelr8
    • ( Page8 )

SMSF trustee guide to navigating a way through pandemic

Comments Off on SMSF trustee guide to navigating a way through pandemic

The COVID-19 pandemic has affected everyone’s lives and SMSF trustees are no exception. With Melbourne coming out of lockdown, it seems the worst is behind us although, as much of Europe and the US reminds us, COVID-19 remains a pernicious foe.

So assuming Australia is returning to a degree of pre-coronavirus normality, it’s time for trustees to focus on how best to position their fund for 2021 – both from regulatory and investment perspectives.

If trustees are looking for one word to describe investment markets in 2020, volatility would likely be on the mind of many. Equity markets have see-sawed in response to the economic prognosis caused by the pandemic, reinforcing why SMSF trustees must not only have a documented investment strategy (it’s a legislative requirement) for their fund but review it regularly.

Comprehensive reviews are not just necessary to gauge the investment performance of a fund and, if necessary, adjust the investment strategy. Other events can necessitate the need for a review such as the death of a member or a relationship breakdown involving fund members.

It’s also important for trustees to have an exit strategy, particularly if there is a dominant trustee or the fund has assets that may be difficult to sell.

Remember, too, for those SMSFs owning residential or commercial property, the fund may not be receiving full rental payments under their lease agreements because of COVID-19, meaning less income.

Under normal circumstance, if trustees agree to offer tenants rent relief, it could result in a legislative breach. However, the ATO has confirmed no compliance action will be taken in 2019-20 and 2020-21 for temporary rent reductions, waivers or deferral because of COVID-19.

If rent relief is provided, it is important that the trustees can show that the relief is on commercial arm’s length terms (the national cabinet’s mandatory rental code of conduct can be used as a guide), that the tenant can demonstrate they have been financially impacted by COVID-19, and that the rent relief provided has been appropriately documented.

Considering the devastating financial impact of the global pandemic, some SMSF members may have been tempted to use their SMSF as a source of short-term financial assistance.

With a few exceptions, trustees must understand they cannot access their superannuation early from their SMSF, even for a short period. (Earlier this year, legislation was amended to allow superannuation members, including SMSF members financially impacted by COVID-19 to access up to $10,000 in 2019-20 and another $10,000 this financial year until December 31, 2020.)

Legislative changes

Investment decisions are always part and parcel of a trustee’s remit. COVID-19 has forced legislative changes, as well as prompted the ATO to allow several important compliance relief measures for trustees who have been affected by the pandemic, so SMSFs need to keep abreast of and factor these changes into their planning for 2021.

The minimum drawdown requirements for account-based pensions and similar products have been temporarily reduced by 50 per cent for 2019-20 and 2021-21. This measure is designed to assist retirees by reducing the need to sell investment assets (often at depressed prices) to fund minimum drawdown requirements. It is not compulsory to reduce pension payments in line with the new reduced drawdown requirements, but if you do, it’s important to document your decision.

Although the standard concessional and non-concessional contribution caps have not changed since the last income year, your eligibility to contribute may have. New legislation allows people aged between 65 and 66 to make voluntary contributions (previously restricted to people below 65) without meeting a work test.

The government is also introducing legislation (which hopefully will be passed soon) to allow people aged between 65 and 66 the ability make up to three years of non-concessional superannuation contributions under the bring-forward rule. The way the bring-forward rules work can be complicated, particularly if you have a sizeable superannuation balance, so professional advice might be needed to ensure the contributions caps are not breached.

It’s also useful to note that if a total superannuation balance is less than $500,000, and not all of the concessional contribution cap was used in 2018-19 or 2019-20, SMSF members may be able to carry forward the unused amount of a concessional contribution cap in those years to the current income year. So a concessional cap for 2020-21 could be much higher than the standard $25,000.

Finally, social distancing and isolation requirements have led to a relaxation of rules so that trustees can now sign financial documents electronically and still satisfy their regulatory obligations. If trustees do intend to go down this path, it is important the system is secure.

COVID-19 has moved the goalposts for trustees even more dramatically than the global financial crisis, with no better evidence than the government-initiated changes to assist SMSFs through this pandemic. It’s imperative, therefore, for trustees to be cognisant of the changes, especially if they are the fund’s decision-maker, because the cost of not doing so may be high indeed.

Written by John Maroney, CEO of SMSF Association
Source: The Australian Financial Review

 

What is an actuarial certificate?

Comments Off on What is an actuarial certificate?

An actuarial certificate is a document prepared by an actuary that certifies how much of a self-managed super fund’s earnings are derived from its members’ accumulation phases and how much from retirement phases. This information has tax implications. It is used to claim exempt current pension income (i.e. tax-exempt earnings) in the fund’s annual tax return.

When is an actuarial certificate required?

An actual certificate is required whenever an SMSF member moves into the retirement phase and there are one or more other members of the fund that remain in the accumulation phase.

In addition, an actual certificate will be required each year that there is at least one member in each phase if the actuary is using the proportionate method to calculate the fund’s exempt current pension income. The proportionate method is based on the total value of the fund’s assets each year.

However, if the segregated method is used by an actuary to calculate a fund’s exempt current pension income, no actuarial certificate is required, provided that the retirement phase income streams being paid by the fund are one or more of the following types:

  • an allocated pension,
  • a market-linked pension,
  • an account-based pension.

The segregated method separates assets between the accumulation and retirement phases.

Source: superguide.com.au

Clarification on reporting death benefit rollovers and paying death benefits after a rollover

Comments Off on Clarification on reporting death benefit rollovers and paying death benefits after a rollover

On 22 June the Treasury Laws Amendment (2019 Measures No. 3) Act 2020 amended the law retrospectively with effect from 1 July 2017 to ensure any untaxed element determined in accordance with section 307-290 of the Income Tax Assessment Act 1997 (ITAA 1997) is not included in the receiving fund’s assessable income.

A transferring fund is still required to apply section 307-290 of the ITAA 1997 to determine if there is an untaxed element in the lump sum being rolled over where they have claimed, or will claim in relation to the benefit, deductions for premiums for certain types of insurance under section 295-465 or 295-470 of the ITAA 1997.

However, where a dependant beneficiary rolls over a death benefit, it is the Commissioner’s view that there is insufficient connection between any deductions claimed by the transferring fund and any lump sum benefits paid by the receiving fund from the dependant beneficiary’s new pension interest, for section 307-290 of the ITAA 1997 to apply to any of those subsequent payments.

That is, where the receiving fund does not claim any deductions for any death and disability insurance offered to the dependant beneficiary as part of their new pension interest in the receiving fund, section 307-290 will not apply to any lump sums paid from that interest.

In light of this, the Commissioner considers SMSFs completing item 16 of the death benefits rollover statement do not need to include an element untaxed in the fund. Any amount that may be determined under section 307-290 can be reported as a taxable component – element taxed in the fund.


Case Study

Anthony is 57 and a death benefit beneficiary. Anthony’s spouse was 64 when they died, Anthony chooses to rollover the death benefit from their SMSF (a fully taxed fund) to an APRA regulated fund and start a pension in the APRA regulated fund.

The death benefit is $200,000 and has a tax free component of $10,000. As the SMSF had claimed deductions for death and disability insurance; applying section 307-290 of the ITAA 1997, an untaxed element arises of $1,000.

When completing the death benefit rollover form:

  • At Label 11 the trustee will enter code Q
  • At Label 16 the trustee will report:
    • a tax free component of $10,000 and
    • a taxable component – element taxed in the fund of $190,000.


Where the receiving fund claims a deduction for insurance premiums under section 295-465 or 295-470 of the ITAA 1997 in respect of insurance offered to the dependent beneficiary as part of their new interest, the fund will be required to apply section 307-290 of the ITAA 1997 to any subsequent death benefit lump sums paid from that interest.

Source: ato.gov.au

 

ATO issues reminder about October TBAR deadline

Comments Off on ATO issues reminder about October TBAR deadline

The Tax Office has reminded any SMSFs that reports transfer balance account events on a quarterly basis that the report will be due on 28 October where they had an event occur in the September quarter.

In an online article, the ATO stated that where a TBA event occurred in a member’s SMSF between 1 June and 30 September 2020 and any member had a total super balance greater than $1 million, the SMSF will need to report the event.

If no TBA event occurred, they will not need to report, the ATO said.

“The TBAR is separate from the SMSF annual return and it enables us to record and track an individual’s balance for both their transfer balance cap and total super balance,” the ATO explained.

“Different reporting deadlines will apply, if any of your members has exceeded their transfer balance cap, and we’ve sent them an excess transfer balance determination or a commutation authority.”

Back in July, the ATO flagged that it was still seeing some significant errors with transfer balance account reporting, with retrospective reporting, duplicated reporting and late reporting listed as some of the ongoing concerns.

“One of the most significant issues we’re concerned about is late reporting and that’s resulting in members being in excess of the cap for longer periods, thereby needing to commute more from their pension accounts or paying more tax,” ATO assistant commissioner Steve Keating stated.

“Members are at risk of having their pension commuted twice, and this might happen if they have both APRA and SMSF pension accounts, where they commute from their SMSF due to receiving a determination from us, but they don’t report that commutation to us.”

Source: SMSF Adviser 

Investment segregation in an SMSF explained

Comments Off on Investment segregation in an SMSF explained

When advisers hear the word ‘segregation’ in an SMSF context, they typically think of segregation for tax purposes. Broadly, this type of segregation involves calculating a fund’s exempt current pension income exemption for a financial year under the segregated method, with any capital gains (or losses) in respect of ‘segregated current pension assets’ being disregarded.

Segregated current pension assets are fund assets excluding ‘disregarded small fund assets’ that are invested, held in reserve or otherwise dealt with solely to enable a fund to discharge all or part of its liabilities in respect of retirement phase pensions. Most commonly, segregated current pension assets arise where 100% of a fund’s assets are supporting retirement phase pension liabilities under the ATO’s view of deemed segregation.

This article examines a different kind of segregation; namely, segregation for accounting or investment purposes. In broad terms, investment segregation involves fund assets being designated to particular members or superannuation interests, eg, for the purposes of allocating investment returns and capital appreciation. Investment segregation can essentially be thought of as a form of member investment choice that is implemented within an SMSF. Naturally, all SMSFs provide a certain degree of member investment choice by virtue of being ‘self managed’. However, this article draws a distinction between genuine member investment choice and the typical investment approach for SMSFs where there is a general pool of fund assets that do not ‘belong to’ any particular member.

Investment segregation potentially offers unique planning opportunities due to the flexibility it provides in relation to apportioning growth between different member accounts. For example, with an appropriate allocation of assets, investment segregation can be used to ensure that Member A’s account balance grows faster than Member B’s account balance, or it can be used to ensure that Member’s A retirement phase account grows faster than Member A’s accumulation account. Accordingly, this flexibility can be used to provide more tax effective outcomes, including in respect of the $1.6 million transfer balance cap (‘TBC’).

We now examine the relevant rules for implementing investment segregation in an SMSF. The discussion will focus on allocation of investment returns rather than an apportionment of costs.

The fair and reasonable standard

Regulation 5.03 of Superannuation Industry (Supervision) Regulations 1994 (Cth) (‘SISR’) provides that trustees must determine how investment returns are to be credited or debited to a member’s benefits in a way that is fair and reasonable as between all the members of the fund and the various kinds of benefits of each member of the fund. There is an equivalent rule in relation to charging of costs (see reg 5.02 of the SISR).

This begs the question: what does ‘fair and reasonable’ require? In the context of the usual pooled investment approach, SMSF trustees generally distribute investment returns in accordance with the existing proportions of member benefits in the fund, subject to the terms of the SMSF deed. Naturally, the ‘fair and reasonable’ standard would require adjustments to be made where there are other variables at play, such as new members being admitted or members ceasing membership during a financial year.

The ‘fair and reasonable’ standard allows for departures from the pooled approach where there is a segregation of member investments in place. For example, under such a strategy, Member A could pick certain assets for investment purposes and it would be entirely consistent with the fair and reasonable standard if the investment returns on those particular assets were credited to Member A’s account.

What does the ATO say?

The ATO acknowledge on their website that investment segregation is allowable (‘Super changes – frequently asked questions’ https://www.ato.gov.au/Individuals/Super/In-detail/Super-changes—FAQs/ (QC 51875)):

Where my SMSF cannot use the segregated method to claim ECPI (exempt current pension income), can I still segregate assets for investment returns?

The change which limits an SMSF from using the segregated method only relates to the ability for that SMSF segregate for the purposes of claiming ECPI. So in these cases, even though the SMSF may be required to use the proportionate method to calculating its ECPI, the trustee can still decide which assets will support pension accounts. In essence, the returns on the segregated assets would continue to be allocated to the respective pension account(s) and the allocation of any tax would be done proportionately.

The above commentary from the ATO makes it clear that the rules in s 295‑387 of the Income Tax Assessment Act 1997 (Cth) that preclude certain SMSFs from using the segregated method for claiming exempt income does not preclude such funds from using investment segregation.

Other relevant considerations

The governing rules of the SMSF should allow for investment segregation and the investment strategy of the fund should be appropriately drafted to reflect the principles of member investment choice.

A fund’s investment strategy documentation is also important for a host of other reasons. For instance, in SMSFR 2008/1 [13], the ATO state that if the activities and investments of an SMSF are undertaken in accordance with the fund’s investment strategy, this is a factor that weighs in favour of the conclusion that the SMSF is being maintained in accordance with the sole purpose test. Additionally, under s 55(5) of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SISA’), SMSF trustees can be afforded a defence against damages when acting in accordance with the fund’s investment strategy and other applicable SISA covenants, including having regard to investment choice (see s 52B(4) of the SISA).

How can this be used?

As explained below, investment segregation may assist in managing a member’s TBC.

The TBC is a cap on the value of assets which can be transferred into tax-free retirement phase. As the TBC is measured through a static system of debits and credits, growth above that cap (ie, $1.6 million limit as indexed) is not tested and does not trigger an excess transfer balance.

Segregation of investment returns provides an opportunity to pinpoint allocation of growth on an asset-by-asset basis, assuming that asset returns and growth can be accurately predicted. For example, if a well-performing parcel of shares is linked to a member’s pension account, that pension can benefit from the growth in the shares (eg, due to large dividends being paid and the share price increasing) without impacting the member’s transfer balance. Take the following example:

Example

Mr and Mrs Renner are members of the Renner Family SMSF. On 1 July 2018, Mrs Renner turned 65 and commenced a pension. Due to the fund adopting investment segregation, it is agreed that the asset supporting the pension is real estate in the fund valued at $1.6 million. Assume that minimum the annual pension payment is made each year in respect of the pension.

Due to decent rental returns and capital appreciation on the real estate, Mrs Renner’s pension account balance increases to $1.85 million by 30 June 2021 which provides a better outcome for her TBC than if she had merely received a proportion of overall fund growth.

Naturally, appropriate records should be retained in relation investment segregation — ie, based on an appropriate and regularly reviewed investment strategy that provides a proper basis for investment segregation.

Moreover, it should be borne in mind that if investment segregation is maintained solely for tax purposes, the ATO may seek to apply the general anti-avoidance provisions in pt IVA of the Income Tax Assessment Act 1936 (Cth), ie, if the sole or dominant purpose of the segregation is to obtain a tax benefit.

Conclusion

If implemented appropriately and authorised under the SMSF’s governing rules, investment segregation can offer unique planning opportunities for SMSF trustees and advisers due to the flexibility it provides in relation to apportioning growth between different member accounts.

Expert advice should be obtained before implementing investment segregation.

*           *           *

This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional. The above does not constitute financial product advice. Financial product advice can only be obtained from a licenced financial adviser under the Corporations Act 2000 (Cth).

Source: DBA Lawyers

Tax Office gears up for 6-member SMSF bill

Comments Off on Tax Office gears up for 6-member SMSF bill

The ATO has flagged that if the bill to increase the number of members allowed in an SMSF is passed before 1 July next year, its systems may not be ready in time, but it will look to implement workaround solutions.

Earlier this month, a measure announced in the lead-up to the 2018–19 budget to increase the number of members allowed in an SMSF from four to fix was reintroduced into Parliament, after previously being scrapped prior to the federal election.

The amendments will apply from the start of the first quarter that commences after the act receives royal assent.

The bill was referred to the economics legislation committee on 3 September. The committee is due to report back on 4 November.

While the bill was introduced during the September parliamentary sittings, it is expected to be carried over to the November or December sittings, ATO director Kellie Grant told delegates at the Tax Institute National Superannuation Online Conference.  

 

“If the measure is passed by both houses at that time and receives royal assent, we’ll be looking at a 1 January start date,” Ms Grant said.

“Now, should the law commence before 1 July 2021, our systems may not be ready by that stage, but we will have workarounds in place until those system changes are made to allow up to six members in a fund.”

SMSF trustees and professionals, she said, need to be aware that there will be a period of time where their information may not be readily accessible in the ATO’s systems.

“[They should] also be aware that state-based state law may limit the number of individual members in a certain fund, but of course, that can be overcome by appointing a corporate trustee to the fund,” she said.

Commenting on the bill in an online article, SMSF Alliance principal David Busoli noted that if the measure does become law, the effect of additional members on control and investments will need to be carefully considered.

“Also, due to the Trustee Acts in most states — NSW, Qld, Vic, WA and ACT — a corporate trustee will be required,” he added.

Source: SMSF Adviser 

6-member SMSF bill introduced into Parliament

Comments Off on 6-member SMSF bill introduced into Parliament

A measure from the 2018–19 budget to increase the number of members allowed in an SMSF from four to six has been reintroduced into Parliament, after it was scrapped prior to the election.

Senator Jane Hume has introduced Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020 into the Senate this week, which amends the SIS Act, Corporations Act, ITAA 1997 and Superannuation (Unclaimed Money and Lost Members) Act 1999 to increase the maximum number of allowable members in SMSFs from four to six.

The amendments will apply from the start of the first quarter that commences after the act receives royal assent.

The Coalition government first announced plans to extend the SMSF member limit in the lead-up to the 2018–19 federal budget.

Former Minister for Revenue and Financial Services Kelly O’Dwyer said the change would increase choice and flexibility for members.

The measure was previously introduced into Parliament as part of the Treasury Laws Amendment (2019 Measures No. 1) Bill 2019. However, with Labor opposed to the measure, the Liberal Party agreed to remove the amendment to increase the SMSF member limit in order to pass the other measures contained within the same bill.

The measure to increase the SMSF member limit has previously had mixed opinions, with some experts flagging the potential risks that additional members pose in terms of disputes between members and estate planning.

Other SMSF specialists have pointed out that increasing the number of members in an SMSF could raise the risk of members falling victim to elder abuse.

Other commentators in the SMSF industry have supported the measure as it provides larger families with the option of bringing their children into their fund.

Source: SMSF Adviser 

 

Control still key driver for SMSFs

Comments Off on Control still key driver for SMSFs

The ability to have personal control over superannuation investments has remained the key driver behind the establishment of SMSFs and concerns they were being used as property investment vehicles was a minor issue, according to research group Investment Trends.

Investment Trends chief executive Michael Blomfield said research conducted for the “2020 Vanguard/Investment Trends SMSF Investor and Planner Report” found control-related issues continued to rate as the leading reasons for the establishment of SMSFs despite an increase in the level of interest in property held within an SMSF since 2015.

“In the year to September 2019, the number of SMSFs continued to grow, but at a lower rate than previous years. There were almost 600,000 funds by September 2019, but only 20,000 were set up in the 12 months before that date,” Blomfield said.

“When we talked about why they [trustees] established an SMSF, control of investments remains the big driver. Control is the number one issue by a long way for all SMSF trustees and behind that we start to get into issues related to better returns and being more tax effective.”

He said the issue of property investment was one he had to “call out” and  despite an increase in investment in property between 2015 and 2020 by SMSF trustees, as a reason for starting an SMSF it “does not get anywhere close to the drivers for control or approach the secondary drivers of better returns”.

He pointed out control was the leading factor for the establishment of a fund for 67 per cent of SMSF trustees, while property investment was the leading factor for around 32 per cent of funds and prior to 2015 was the primary driver for only 15 per cent of trustees.

While SMSF trustees continued to remain strong in their views they can make better investments than an Australian Prudential Regulation Authority-regulated fund, some trustees had hesitated to set up a fund because of regulatory concerns, he said.

“We saw in lead-up to the last federal election there was discussion about franking credits and we were not sure if that drove people to holding back or decreased their interest in SMSFs,” he said.

“Trustees have been telling us for a long time that it is regulatory uncertainty that makes them think twice, or three times, about whether SMSFs are the right place to be, and while we are still seeing growth, we have no reason to believe that has ceased.”

The report was compiled from 3156 trustee responses to a quantitative survey conducted online between February and May and also found a large unmet need for advice from trustees who had not made major changes to their SMSF investments as a result of COVID-19 market downturns.

 

Changes to your super

Comments Off on Changes to your super

The recent change to change to the work test for making contributions to superannuation to age 67 has certainly raised issues with clients making contributions after 65 and how those changes impact on any contributions that are being made for them. The downside of the Government’s 2018 budget announcements for superannuation contributions is that the opportunity to use the bring forward rule is still restricted to those age 65 or younger.  

The changes to the income tax law in the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020, which move the bring forward rule to age 67, remain in the House of Representatives. As parliament does not resume until early August, the bill has a way to go prior to becoming law. So where are we now with contributions for anyone 65 or older with the start of the 2020/21 financial year?

Until 30 June, 2020, personal concessional and non-concessional contributions could be accepted by a fund without any work test being met prior to the member reaching age 65. However, once the person reached the age 65 in the financial year the member was required to meet the work test at some time during that year and in all later financial years prior to the contribution being accepted.  

As with personal superannuation contributions, the fund trustee is unable to accept personal concessional or non-concessional contributions any later than 28 days after the month in which the person reaches age 75. There is one exception to the age test which is the acceptance of downsizer contributions.  

The only exceptions to the work test are where a person wishes to make contributions in the year after ceasing work and downsizer contributions.  Ceasing work contributions are permitted to be made on a once only basis after the member has reached 67, previously age 65, in a year after they have ceased work if they have a total super balance on 30 June in the previous year of less than $300,000. These contributions can be accepted by the fund trustee 28 days after the month in which the person reaches 75.

As far as downsizer contributions are concerned, a person and their spouse are eligible to each make a contribution of up to $300,000 within 90 days of selling their main residence after age 65. There is no upper age limit applying to downsizer contributions or any work test that needs to be satisfied.

Anyone who is employed after age 65 may be eligible for compulsory employer contributions and if they meet the work test, they may wish to salary sacrifice to super. 

Employer-mandated contributions, such as those made for super, guarantee purposes or under an industrial award, are not subject to a work test or age limit. However, other employer contributions, including salary sacrifice, are subject to age limits described above.

The changes to the work test requirements have been extended to include non-concessional contributions made for an eligible spouse. The age restriction which applied up to 30 June, 2020, permitted spouse contributions to be made between ages 65 and 70 providing the spouse met the work test. 

From 1 July, 2020, this is now extended to apply for spouse contributions made between 67 and 28 days in the month after the spouse reaches 75 in line with other personal superannuation contributions. The work test is required to be met prior to contributions being made to the fund.

In relation to the operation of the bring forward rule for non-concessional contributions, those fund members who are in the 65 to 66 age bracket are in a bit of a dilemma from now until the time when the passage of the legislation is clear. It is only those members who have a total superannuation balance of less than $1.5 million as at 30 June, 2019, or 2020 that should be concerned if they wished to maximise their non-concessional contributions by using the bring forward rule.  

The rules for non-concessional contributions allow up to two years standard non-concessional contribution to be brought forward if the total super balance as at 30 June in the previous financial year and up to one year standard non-concessional contribution  is between $1.4 and $1.5 million. Anyone with a total superannuation balance of greater than $1.5 million on those dates does not have access to the bring forward rule for the subsequent financial year.

As an example of the operation of the bring forward rule, a person who is currently 65 would have access to the bring forward rule of at least one year standard non-concessional contribution assuming their total super balance is less than $1.5 million. If they contribute greater than the standard non-concessional contribution, the bring forward rule will be triggered and they will be able to make the relevant contributions over a two or three year period. If they make the contributions prior to reaching age 67 the fund can continue to accept the contributions without requiring the member to meet the work test.

In contrast, a person who is currently 66 or 67 will not be able to trigger the bring forward rule as they were older than 65 on 1 July in the 2020/21 financial year. This will limit the maximum amount of non-concessional contribution they can make without penalty to $100,000 p.a., however, the consolation is that there is no requirement for them to meet the work test unless they wish to make contributions in the financial year after they reach 67.

Source: moneymanagement.com.au

Important eligibility condition flagged for early release of super

Comments Off on Important eligibility condition flagged for early release of super

SMSF clients that have been unemployed for a number of years may be eligible for early release of super, but it is vital they are able to show that they are facing financial difficulty, says a technical expert.

SMSF Association deputy chief executive Peter Burgess explained that in order for clients to apply to access their super early, they need to meet at least one of the eligibility conditions.

“In addition to a client meeting at least one of these conditions, they also need to show that they’ve been adversely impacted by the pandemic,” Mr Burgess said at the SMSF Association Technical Day last week.

With some of the conditions, it’s quite obvious that the client has been financially impacted, he said.

“[For example], if they’ve been made redundant as a result of the pandemic or their hours have been reduced, then it’s pretty obvious that they’ve been impacted and that they qualify,” he explained.

Other conditions, however, are not as obvious, he noted.

“Where the client is unemployed and perhaps has been unemployed for a number of a years, it may not be so obvious that they have been financially impacted by the pandemic,” he said.

“In fact, we’ve had a number of advisers ask us questions about unemployed clients. The common scenario is where the client has been a stay-at-home parent and they’ve been unemployed for many years.”

They can qualify to access their super early under this measure, Mr Burgess said, as long as they can show that they have been financially impacted by the pandemic.

“It’s been put to us that it’s not difficult to show that someone has been impacted. The fact that they’re paying more for their toilet paper could be an indication that they have been financially impacted, but that’s clearly not the intent of these provisions,” he stated.

“So, in addition to meeting one of these conditions, they also need to show that they’re facing difficulty making ends meet and those difficulties have been caused by the coronavirus.”

Source: SMSF Adviser

© Practical Systems Super | All Rights Reserved

Privacy Policy | Disclaimer | Financial Services Guide | Sitemap

Practical Systems Super Pty Ltd is a Corporate Authorised Representative of PSA Super & Financial Services Pty Ltd.

AFSL no. 488562 | ABN: 72 626 268 237

Facebook-f Linkedin-in