Some of us right now are finding the financial stress from Coronavirus very difficult and may have heard of the early access to your super fund monies. As part of the Economic Response Package the Federal Govt changed some of the rules regarding accessing your super fund monies due to financial hardship.
So what can you get access to and what are the rules.
Under the changes to Early Access to Super (due to coronavirus) the Federal Govt will allow individuals to withdraw up to $20,000 from their superannuation funds. Under the rules, you can withdraw up to $10,000 before 1 July 2020 (so between now and 1 July 2020) and then from 1 July 2020 up to September 24, 2020 up to a further $10,000. What this means is that there are 2 application periods and in each period up to $10,000 can be applied for BUT there is only one application per period. Thus, if you made an application on the 1st May 2020 for $6,000 you will only receive $6,000 and you cannot make a further application until 1 July 2020. Assuming you make a further application in this second period and apply for the full $10,000, then in this situation the total you will get is $16,000 over the two periods.
Are there any tax implications? No. Under these hardship provisions, the money is treated as tax free income. It is treated as "non-assessable non exempt income" which simply means you get the money from your super fund tax free and it is not reported or included in your tax returns. This also means it will be counted as income for any Centrelink benefits.
How do I know if I am eligible? To be eligible under coronavirus reasons, the following must apply:
- on or after 1 January 2020 you were made redundant OR your working hours were reduced by 20% or more. The unfortunate trip up here is that if your employer has negotiated a reduction in your wages by 20% or more but you continue to work the same hours (so you have not been made redundant) then you are not eligible for the super early access.
- for Sole Traders (not employees) the eligibility criteria is that your business has been suspended OR your TURNOVER has reduced by 20% or more.
Great I meet the criteria, how do I apply? You must apply to the ATO via MyGov from 20 April 2020 ( each individual must apply via MyGov, unfortunately Tax Agents cannot do this for you). You will be able to self assess your eligibility. The ATO will then process your application and issue a Determination. If you have a self managed super fund, the determination will be issued to you, the applicant, for you to give to the trustees (yourself). If you have a retail or industry fund, the ATO will issue the determination to you and also to your super fund. The retail or industry fund will then make the payment to you which means you need to ensure your personal bank account details have been updated or provided to your super fund. Under no circumstances should you pay someone to help you access this "early super access release" if that is all they are doing, as there will be scammers out there offering this service. The process is easy and straight forward via MyGov.
Three final points:
1. The ATO will allow you to go into MyGov now to register an expression of interest to access your super monies and then the ATO will be in touch once the application process opens up to finalise your application;
2. The ATO have guaranteed to process your application within one business day of lodgement and payment to be made within three days after processing (very fast turnaround); and
3 Lastly, you should seek professional financial planning advice regarding your overall personal financial circumstances as part of this process. One basic reason for doing this is that your super fund is likely to have to sell assets to fund the payment to you and this will be occurring when asset values (like shares) are significantly down. Please contact me on 0414 877 781 or firstname.lastname@example.org and I will refer you to a trusted qualified financial planner.