COVID-19 measures for Self-Managed Super Funds (SMSF)
The federal government’s COVID-19 support measures contain a range of specific requirements for self-managed super funds (SMSF). This article outlines the relevant measures and how to manage them.
Early Access to Super
If you have been financially affected by COVID-19, you may be able to access some of your superannuation early. Eligible citizens and permanent residents of Australia or New Zealand can apply for up to $10,000 in 2019–20 and again in 2020–21.
If you are a member of a self-managed superannuation fund (SMSF), you or your adviser can apply through the myGov website. The ATO will issue you with a determination advising of your eligibility to release an amount. When your SMSF receives the determination from you, they will be authorised to make the payment.
For SMSF trustees, the ATO has issued this caution: “As an SMSF trustee, you are responsible for you and your members’ retirement savings. Please make sure you are eligible for early release of super before you release any funds from your SMSF.”
Read our article on the risks of releasing super early
SMSF investment strategy ruling
Under all circumstances, including the COVID-19 period, the ATO considers that an SMSF investment strategy must be reviewed at least annually and in the case of significant financial events. However, during the period of the COVID-19 downturn, the ATO has accepted that short-term variations to the investment approach, including asset allocations will not constitute a variation from the investment strategy. However, action must be taken to adjust the investments.
Of course, changes of this type carry risk. Therefore, before undertaking any changes, it is vital to seek appropriate advice. We recommend that you examine the Goals Based Investing approach, as advocated by WLM Financial. Goals Based Investing seeks explicitly to mitigate risk during periods of downturn and to align with the specific short, mid and long-term financial goals of investors.
Temporary Rest Reduction to related parties
Under normal circumstances, when an SMSF owns property that is leased to a related party, the rent must be at the market rate.
The ATO has taken this position concerning rent reduction during the COVID-19 period.
“Some landlords are providing tenants with a reduction in or waiver of rent because of the financial impacts of COVID-19. Our compliance approach for the 2019-20 and 2020-21 financial years is that we will not take action where an SMSF gives a tenant - who is also a related party - a temporary rent reduction during this period.”
SMSF in-house assets ruling
The ATO has advised that it will relax compliance rulings for the 5% in-house asset limit during the COVID-19 downturn.
The existing requirement is:
“At the end of a financial year, if the level of in-house assets of an SMSF exceeds 5% of a fund’s total assets, the trustees must prepare a written plan to reduce the market ratio of in-house assets to less than 5%. This plan must be made before the end of the next following year of income.
However, the ATO has advised that it will not undertake compliance activity if the rectification plan is unable to be executed because the market has not recovered, or it is unnecessary to implement the plan as the market has recovered.
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