In response to the Coronavirus pandemic, the ATO has implemented measures to help Australians deal with the financial difficulties during this uncertain time. The measures are explained as follow:
Reducing Minimum Drawdown Rates
During the depressed market, the Trustees might have to sell SMSF’s assets to withdraw the amount as required for pension payment. To provide retirees with more flexibility to manage their superannuation assets, the Government has reduced temporarily the minimum annual payment required by 50% in the 2020 and 2021 financial years. This applies to all ages. For example, Steve is 68 years of age. At 1 July 2019, his account based pension balance was $480,000. The minimum annual payment was calculated at 5% (the percentage applicable to this age) of his pension balance, which is $24,000. Following the temporary change of law, the annual minimum pension rate for 2019-20 is 2.5%, which means the required amount to be withdrawn is $12,000. For pensions and annuities commencing part-way in the 2020 and 2021 financial years, the temporary reduction of 50% also applies. The ATO has released a video with important aspects about drawdown, please click here to see the video. For more information on minimum drawdown rates, please click here.
Early Access to Superannuation
The measure applied allows individuals affected by COVID-19 to access up to $10,000 of their Super for 2019-20 financial year. Individuals will also be able to access a further $10,000 in 2020-21 financial year. Eligible Members can apply for the $10,000 early access from their superannuation through myGov from now until 31 December 2020. However, one of the following criteria has to be satisfied: 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, either: you were made redundant your working hours were reduced by 20% or more if you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more. In order to obtain an early access to your Super benefits, please apply via MyGov.
The self-assessment process towards the temporary early release is also covered in this video released by the ATO.
Rent Relief
SMSFs can negotiate a rent reduction with a tenant if the tenant has been negatively affected by COVID-19. A tenant can be a related party or a third party, the only concern involving a related party is that it might be more difficult to prove the arm’s length relationship between the SMSF’s property and the related party tenant. The ATO has advised that they will not be taking action towards situations where an SMSF that owns a commercial premise and it is being leased to a related party or a third party and decides to reduce the rent for the 2020 and 2021 financial years. To demonstrate that the nature of the arrangement is on an arm’s length basis see steps below.
Steps to demonstrate arm’s-length terms
For more information on related-party transactions, please click here.
Frequently Asked Questions
I need more time to lodge my Annual Return. What can I do?
Lodgments are due on 15 May 2020. ATO has announced they can be contacted before due date to request an extension. A deferral can be applied by tax agents for their SMSF clients for up to six weeks (Up to 30 June 2020).
Does the ATO provide further guidance on the $10,000 of early release?
Yes, the ATO gives guidance to support the eligible applicants here.
