02/04/2020

The Coronavirus Economic Response Package Omnibus Act 2020 (“the Act”) received assent on 24 March 2020.  Schedule 13 of the Act amends the SIS regulations to make provision for COVID-19 temporary early release of superannuation.  Application for this early release must be made within the period of 6 months starting on the day the new regulation commences.

New condition of release
A new “Coronavirus compassionate ground” condition of release was introduced (sub-regulation 6.19B SIS Regulations).  Individuals affected adversely by the economic effect of Coronavirus are permitted to obtain early release of preserved and restricted non-preserved benefits from their superannuation up to $20,000, in two applications of up to $10,000 for each application as follows:
•    one application in the financial year ending 30 June 2020; and
•    one application in the financial year ending 30 June 2021.
The amount of superannuation released under this measure is not subject to tax (not assessable income and not exempt income).  

Criteria of eligibility
Application can be made to the Regulator (the ATO) on the ground that the amount is required to assist the person to deal with the adverse economic effects of Coronavirus and the person must satisfy any one of the following requirements:
•    the person is unemployed; or
•    the person is eligible to receive any of the following social security payments
-    jobseeker payment;
-    parenting payment;
-    special benefit;
-    youth allowance (other than on the basis of undertaking full-time study or is a new apprentice); or
•    the person is eligible to receive household allowance; or
•    on or after 1 January 2020 the person was made redundant, or their working hours were reduced by 20% or more (including to zero); or
•    for a person who is a sole trader – on or after 1 January 2020, the person’s business was suspended or suffered a reduction in turnover of 20% or more.

Test for reduction in work hours or turnover
The requirements about reductions in a person’s working hours or in their turnover as a sole trader are determined by reference to changes that have occurred since 1 January 2020.  This requires a comparison of a person’s working hours or turnover at the time they make the application and their usual hours prior to 1 January 2020.  For example, a person would be eligible to apply for a determination if they had a 20% or more reduction in their usual working hours or turnover relative to the second half of 2019.  For applications in the 2020-21 financial year, the same test applies.

Self assessment
It is expected that individuals will self-assess their eligibility to apply for the determination.  The requirement about a person’s eligibility to receive the various social security support payments can be satisfied if the person is receiving such a payment or if they are eligible to receive such a payment.  This allows a person to apply for the determination in a timely fashion.

Application
Individuals are restricted to a single application (of up to $10,000) in 2019-20 and another one in 2020-21.

A person who requests an amount of less than $10,000 in their application for a financial year cannot make a subsequent application in the same financial year to release the difference. A person with multiple accounts who has less than $10,000 in any one of the accounts can nominate more than one account and the amounts to be released from each account.

How to apply?
Application for a determination will be made on-line through www.my.gov.au using the ATO’s online services. It is expected that application will open mid-April, but meanwhile there is a link on myGov for individuals affected by coronavirus to register for this benefit.

ATO determination
The Commissioner must determine that a person is eligible to have an amount (or amounts) released on the Coronavirus compassionate ground upon satisfaction that such determination has not already been made for the applicant during the relevant financial year.

The determination must specify the amount (or amounts) to be released and the superannuation entity (or entities) from which the amount is to be released.  The total amount that the Commissioner may determine cannot exceed $10,000.

The Commissioner must also provide a copy of the determination to the applicant and the superannuation entity (entities) covered by the determination.

Trustee responsibility
The trustee must pay the benefits to the member as soon as practicable after the trustee receives the determination, without requiring any additional application from the member.  This provision in sub-regulation 6.17D (3) is an operating standard, to ensure that there will be no delay in the release of the benefits.

SMSFs
In the instance of SMSFs, the member applicant would also be a trustee or director of a corporate trustee of their own fund, in different capacities.  The ATO has issued the following caution:  

“As an SMSF trustee, you are responsible for your and your members’ retirement savings.  Please make sure you are eligible for early release of super before you release any funds from your SMSF.”

For SMSFs, a trustee resolution of the ATO determination, the action taken and the benefits released as a result of the determination would complete the records.

For further information, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222 or email info@townsendslaw.com.au to see how we can assist.