The government has temporarily changed the superannuation rules to assist individuals and retirees impacted by COVID-19.
The changes include:
- allowing individuals to access up to $20,000 over the next six months; and
- a 50% reduction in the minimum pension drawdown requirements for the 2019-20 and 2020-21 income years.
In addition, the Australian Taxation Office (ATO) has undertaken not to take any action where a self-managed super fund (SMSF) landlord offers a rent reduction, deferral or waiver to a tenant.
Early access to superannuation
In response to the economic impact of COVID-19, the government will allow eligible individuals to withdraw up to $20,000 from their superannuation over the next six months. Eligible individuals will be allowed to access $10,000 prior to 30 June 2020 and a further $10,000 between 1 July 2020 and 24 September 2020. These amounts can be withdrawn tax-free.
Who is eligible for early access to superannuation?
To apply for early access, you must satisfy one of the following requirements:
- You are unemployed;
- You are eligible to receive a jobseeker payment, youth allowance for jobseekers, parenting payment (including single and partnered payments), special benefit or farm household allowance; or
- On or after 1 January 2020, you were made redundant, your working hours were reduced by 20% or more, or you were a sole trader and your business had a reduction in turnover of 20% or more.
If you are eligible, you can apply to the ATO. The ATO will then make a determination and provide instructions to your superannuation fund for them to release the money to you.
When can individuals apply for early access to superannuation?
Applications for the first early release payment will open on 20 April 2020. If you register your interest through MyGov now, the ATO will notify you when applications open. Applications for the second early release payment can be made from 1 July 2020.
How do individuals apply for early access to superannuation?
Applications for early release of superannuation will be made through an individual’s MyGov service. The ATO is expected to release further guidance on the application process shortly.
The ATO has advised that individuals will not need to submit evidence of their eligibility; however, evidence should be retained should the ATO seek to confirm eligibility in the future.
Minimum pension reduction
The government has halved the minimum pension drawdown requirements in the 2019-20 and 2020-21 income years. Reduced pension drawdown requirements will help preserve capital in an individual’s pension account.
Which pensions have had their minimum drawdown reduced?
Minimum annual drawdown requirements have been halved for individuals with an account-based pension, allocated pension or market linked pension for the 2019-20 and 2020-21 income years.
What are the new minimum pension drawdown requirements?
The table below sets out the reduced drawdown requirements.
|Age of beneficiary on 1 July
(or start of pension if first year)
|Normal minimum drawdown percentage||Reduced minimum drawdown percentage for the 2019-20 and 2020-21 income years|
|Under age 65||4%||2%|
|65 – 74||5%||2.5%|
|75 – 79||6%||3%|
|80 – 84||7%||3.5%|
|85 – 89||9%||4.5%|
|90 – 94||11%||5.5%|
|Age 95 and over||14%||7%|
Do I need to reduce my pension drawdown?
No, you are not required to reduce the pension payments received from your fund.
If I have already taken more than the reduced minimum pension amount in FY2020, can I put the excess back in?
No. If you have already received pension payments in excess of the reduced minimum drawdown requirement, you cannot put this excess amount back into your fund unless you are eligible to re-contribute the amount within your contribution caps.
SMSF landlords offering rent reductions, deferrals, and waivers
Landlords are offering rent reductions, deferrals, and waivers to tenants economically impacted by COVID-19. SMSF landlords can offer rent relief to unrelated tenants without contravening superannuation rules. However, if the tenant is related to the SMSF, providing rent relief may result in technical breaches of superannuation laws.
The ATO has responded to these concerns by advising it will not take compliance action against SMSF landlords offering rent reductions, deferrals, or waivers to related party tenants because of the financial impacts of the COVID-19.
What does the ATO compliance concession cover?
Provided a SMSF landlord offers a similar rental concession to those being offered in the broader rental market, the ATO has advised they will not seek to take compliance action merely because the tenant is a related party.
Do SMSF landlords need to document temporary rental concessions offered to tenants?
Yes, it is important to document any temporary changes to lease terms and conditions. SMSF trustees should document any change and the reasons for that change in an updated lease agreement, trustee minute, or other contemporaneous document.
Will there be audit implications if a SMSF landlord offers rental relief to a related-party tenant?
SMSF auditors may be required to report a compliance breach where a SMSF landlord provides rental relief to a related party tenant, as the action may technically breach arm’s length requirements or amount to the provision of financial accommodation. Without further guidance, the ATO compliance concession does not alter the SMSF auditor’s reporting obligations.
Due to possible audit complications, when dealing with a related tenant we suggest considering a rent reduction in line with market movements before considering other abatement options as this approach is unlikely to breach compliance requirements.
We understand the ATO is considering amending auditor reporting requirements to exclude breaches that would otherwise be covered by the ATO compliance concession. However, the ATO position on auditor obligations has not been finalised and is subject to change.
What are the next steps?
Clients should contact their Pitcher Partners representative to review their existing arrangements and determine if any action is required in light of the changes.
We also note that further changes and/or ATO guidance may be announced in the coming months.