Access to $10,000 Superannuation in Virus Hardship Cases

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Nodrog, 22nd Mar, 2020.

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  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    If the market rebounds which is expected the loss to super savings could be $20,000 in the first year (assuming a 50% value crash and recovery) or even $85,000+ over the long term as some funds are warning.

    Just because you can does not mean you should.

    Eg Fred has $220K in super in January 2020. Market corrections have seen his super fall by 50% to $110K. He take s $10K in June and $10k in July (but doesnt need to). In September the market rallies like has not been seen with people keen to work, spend and catch up. The market leaps 100% off the lows to regain almost all its loss. Freds $90K becomes $180K. This exercise cost him $40K to access $20K. He wished he had used his high ratecredit card instead. If Fred really needed the cash to keep his home loan or reant arrears paid it may be unavoidable.
     
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  2. thatbum

    thatbum Well-Known Member

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    All other things being equal though (because you could take it out and invest in shares yourself), would it just be the benefit of asset protection and better tax treatment on profits?

    I pretty much say to my family law clients that I wouldn't generally consider $1 in super to be worth as much as $1 outside of super in terms of asset divisions. Flexibility of cash now and all that.
     
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    • If you are in financial stress as a result of coronavirus you may be able to access up to $10,000 of your superannuation in 2019-20 and a further $10,000 in 2020-21
    • You apply directly to the ATO through the myGov website. Access the ATO, Super and a release of super function will be available around mid April. You cannot call or lodge a paper request.
    • You can apply for early access from mid April-2020
    • You cannot apply through your fund directly
    • Once the ATO processes your application, we will let you know how you need to confirm your identity and bank account details with the fund (eg certified copy of ID and bank details in a manner that prove the account is the members)
    • Early access payments are tax-free
    • Early access payments won’t affect Centrelink or Veterans’ Affairs payments
    • Early access payments won’t change the existing ways to apply for a hardship release which may be additional. This generally requires an extended period of paid unemployment benefits etc and a single $10K further release.
    The new law contains stricter rules for access than just asking. The process requires a person self assess and request a determination which the Commissioner will grant without strict testing or evidence. But employment will need to be certified and the Commissioner is likely to immediatey give this if Centrelink support is verified or a checklist is correctly answered.

    read page 147 (of the PDF or page 143 of the documnet) + of this
     
    Last edited: 24th Mar, 2020
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Depends on many factors. I would argue need is the main motivator. $20K of cash($10k each side of 30 June) is like $1m if you arent working and need to keep the roof over your head and feed the kids.

    Yes I have seen some quite stupid choices concerning super. $1m of super is probably more an asset than $1m of notes. Depends on age, work status, preservation and financial needs.
     
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  5. MangoMadness

    MangoMadness Well-Known Member

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    As a low income earner I have already deposited $4k into my wifes super to take advantage of the government low income co-contribution and spouse contribution.

    Maybe I should get her to withdraw that $4k so that we can do the same in July for the next financial year? :)
     
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  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    If early access is tax free could you not access super and then make a deductible contribution?
     
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  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Depends if your wife will be eligible. Page 147+ here : https://parlinfo.aph.gov.au/parlInf...pload_pdf/734816.pdf;fileType=application/pdf
     
  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Yes. But a person with no employment when requesting the release may not really want to do that. Technically if maree was advised by her employer ofn 15th May that she can resume work on 18th May she could satisfy the declaration and also be confident of making a CATCH UP or concessional contribution provided her cap isnt breached
     
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  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I don't think the test is 'no employment' but hardship. And it probably could easily be met by most people. Will have to look into this.
     
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  10. berten

    berten Well-Known Member

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    For sole traders they said if your earnings are down 20% or more. Prob the same threshold for casuals.

    Not ideal, but for many, 20k might keep them fed and sheltered through this.
     
  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Correct and for some it will be down to $0 for some period of time. The approach in the EM appears quite soft to enable a broad eligibility and that is the intent. But you cant be sitting here with two IPs with no issues and a stable job and think you can apply. Its for hardship. And rightly so.

    A person can apply for a determination to have up to $10,000 (prior to AND post 30 June 2020 for a max of $20K) released from superannuation on the ground that the amount is required to assist the person to deal with the adverse economic effects of Coronavirus. To apply for the determination, the person must satisfy any one of the following requirements about their employment or business status:
    • at the time the person applies for the determination, they are:
    – unemployed;
    – eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments) or special benefit under the Social Security Act; or
    – eligible to receive the farm household allowance under Farm Household Support Act 2014; or

    • on or after 1 January 2020 the person:
    – was made redundant;
    – their working hours were reduced by 20 per cent or more; or
    – if the person is a sole trader – their business was suspended or there was a reduction in their turnover of 20 per cent or more.
    [Schedule 13, item 10, subregulation 6.19B(1) of the SIS Regulations]
     
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  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    That rules me out!
     
  13. Ian87

    Ian87 Well-Known Member

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    I'm thinking of accessing it to buy a new bike, allowing me to live longer in poverty when it comes to retirement time :)
     
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  14. David_SYD

    David_SYD Well-Known Member

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    My friend had some downtime before nightshift today and so curiously decided to attempt the application process. His direct response was:

    “Ok so basically it's just not possible to do it, you have to do it through mygov, it's upto 10k and there are 55 million conditions to meet”

    Definitely a case of something seeming too good to be true.
     
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  15. Perthguy

    Perthguy Well-Known Member

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    It depends. If someone has a strong Australian shares holding i.e. the value of their super has dropped 50%, it's a bad time to cash out. They are 'losing' $20,000 of value of super for $10,000, which is the equivalent of $40,000 over 2 years. For the average super fund, that is a big hit.
     
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  16. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    If it feeds the kids it could make a difference. Dont assume all facts are based on your case. I agree that its best avoided but when you gotta feed 4 kids it is actually a great option vs armed robbery.
     
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  17. SatayKing

    SatayKing Well-Known Member

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    One for those who know. I am assuming the $10k withdrawal also applies to SMSF's if in accumulation phase.

    Does the Trust Deed need to be amended to permit this or the Government's say so override that?

    Also, if in pension phase same requirement for amendment if the Trust Deed specifies only for a pension to be paid?

    Neither apply to me but I am curious.
     
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  18. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes the deed might need to be amended to allow it. Seek legal advice before doing so
     
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  19. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The deed needs to be read. Does it allow a release of funds which is an approved relsease or meets a condition of release?
    Some (badly worded) deeds ""parrot"" law at a point in time and can be quite dangrous as they list each defined event and will possibly miss this which is an additional condition of release to the general hardship provision. Its possible after 30 June to satisfy both new rules and even access a total of $30K. $20K tax free and $10K subject to tax.

    Some deeds also include a clauses which consider any law not explicitly provided in the deeds will apply as if they are included.
     
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  20. JohnPropChat

    JohnPropChat Well-Known Member

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    A friend who is a permanent employee had his hours reduced by a bit over 20%. Spent most of their savings on the recent purchase of a PPOR and rennovation. They struggled and saved to get where they are today and were briefly happy that hey finally have a roof over their head and this happens.

    Mortgage with Worstpac, trying their luck with the deferral process. For someone like him, a $10k release and put back straight in as a tax deductible contribution means extra cash flow. Every bit helps. The only thing going for him is his super contributions are are in "Stable" which experienced about 1.5% loss so far so he'll still be up by about 18% with the tax deduction if he can pull it off.
     
    Last edited: 2nd Apr, 2020
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