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. JohnPropChat

    JohnPropChat Well-Known Member

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  2. Simon Hampel

    Simon Hampel Founder Staff Member

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  3. Paul@PAS

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

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    I would tread really carefully on this.

    Promoter penalties will apply to the efforts to recommend a tax benefit. What I have seen so far is loads of people still working suggest this strategy. For those genuinely impacted I see no concerns. But a working person who thinks they can apply as the cash is better in their offset could face a world of pain. Data matching 101. For all who sought release cross match to centrelink or jobseeker and cross match to contributions of $5K + in the period March to June 2020. Ping. 100% review - Did you illegally access your super ? letters ? By making a false declaration. That is a hefty penalty on top.

    The process to seek release has a major condition. Impacted persons. To access release a self disclosure if required to the Commissioner who will give a (largely automated) determination. If a taxpayer mistates their eligibiity then it may be cancelled after the event and the withdrawal subject to (illegal access) withdrawal rules + false declaration penalties. I dont believe the Commissioner can cancel the deduction claimed though.

    Some super funds may not process the requested release if suitable evidence is not provided too. A determination is not a order. It merely permits a withdrawl. The trustee may need to still comply with SISA Regs and the Act.
     
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  4. SatayKing

    SatayKing Well-Known Member

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    Not beyond the realm of possibility people in the ATO can read. So maybe they are able to read such articles, be aware of the possibilites and adjust accordingly. A wild guess on my part.
     
  5. Tony3008

    Tony3008 Well-Known Member

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    Following this advice is obviously not something TPTB intended, but it's just an extension of TTR (transition to retirement) which AIUI is standard advice to everyone over a certain age (60+?). Guilty as charged: I'm drawing my super and, as I'm still working, salary sacrificing to the max.
     
  6. menty

    menty Well-Known Member

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    I know it applies for sole traders, but what if a business (no employees) was to pull money from superannuation 10K to pay suppliers in order to help cash flow. If these bills are then paid before June, and the 10K is credited back into super, could the individual get a tax deduction on that 10000? Or would this require a private ruling/ato determination.
     
  7. Terry_w

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

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    a business is not an entity but a thing an entity does. Only individuals have super accounts.
     
  8. Terry_w

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

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  9. Paul@PAS

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

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    AFSL, TPB licensing, Accountants Liability under SIS to personal damages, promoter penalties, irresponsible journalism are some issues that seen applicable. An accountant cant give financial advice and I struggle to see the form of financial advice that doesnt self incriminate for breach of financial advice requirements. A false declaration to the ATO wont work. Penalties - even Part IVA ?

    This mirrors the tragic tale of the American guy this week who thought the US President suggestion about a malaria drug sounded good. So he drank a litre of the drug which is not for oral consumption. He thought it was the same drug. Nope it was similiar and used to clean fish tanks. He died Man Dead From Taking Chloroquine Product

    Dont believe what you read. Who wrote it and is it even true ?
     
    Last edited by a moderator: 2nd Apr, 2020
  10. Heinz57

    Heinz57 Well-Known Member

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    Was thinking of putting one of our funds into retirement mode in the next FY and drawing the new minimum %.

    Taking 2 x 20k drawdowns would give roughly same results, no issue with meeting qualification criteria.

    Are there any benefits to keeping the fund in accumulation mode v retirement mode for an over 60 no longer working?
     
  11. Paul@PAS

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

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    Not normally. There are no extra taxes from pension mode. But there can be other benefits and costs. Eg actuarial cert. Pro rata cgt etc. Refundable tax credits are often ignored.

    Recontribution and other strategies such as rev pensions can involve huge tax benefits to dependants etc
     
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  12. Archaon

    Archaon Well-Known Member

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    I may be being made redundant (voluntarily) in the coming days, and my manager is saying it would be a lump sum, approx $37k (if my calculations are correct, 20k redundancy and 17k in leave), how will this be treated from a tax perspective? Are redundancy payments calculated differently?

    The lump sum would put my taxable income upto roughly 127k from 90k so i would lose about 37% of it in tax.

    Can I get my employer to contribute a lump-sum payment as a salary sacrifice pre-tax? Can i contribute to my super post-tax and claim a deduction to receive some of the tax back etc?

    Would I also be able to access 10k back of my super this and next financial year tax free?

    I'll be talking to my accountant today to go over my options, but it is handy to hear all your valued opinions on matters of tax etc.

    Regards,
    Arc
     
  13. Islay

    Islay Well-Known Member

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  14. Paul@PAS

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

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    The total PROPOSED amount should come with a pre-paymnet estimate that breaks it down.

    1. Bond fide redundancy element is subject to special tax rules which consider the duration in full years. The amount of the eleigible amount is tax free and no withholding applies. Any surplus is 2.
    2. Excess is a eligible termination payment and will be taxed as normal income or subject to a offset. The employer will generally withhold the rate of tax specific to the sum so no tax shortfall should occur when you lodge the 2020 year return. ETPs cannot be paid to super. You cant sal sac a redundancy paymnet, unused leave or ETP but you can consider making a personal catch up concessional contribution. Many fear their employer will make further super contributions but most redundancy & termination elements do not attract super contributions.
    3. Other amounts including unused leave etc are taxed as normal income.

    Other considerations may include what super fund you are in. Its less likely these days but some employee funds may require you to depart. Industry funds are fine. However sometimes life insurance may lapse if you dont opt in if contributions stop. And salary continuance cover in super may have $0 value. It is worth calling the fund to ask what impacts are involved.

    You will also receive a separation certiifcate which may be used for Centrelink. Some paymnets are delayed based on the amounts you are paid as if you are paid out this must be depleted using a formula, first. Applying early will start the clock to avoid delays later, if applicable. You will get a concession card however.

    Once redundant, yes you can access $10k of super (and even recontribute it if you wanted) if at the time of the request you are not employed and meet ONE of the tests (eg redundant and unemployed). However if you obtain work then that test may need to be reconsidered after 30 June again.
     
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  15. Archaon

    Archaon Well-Known Member

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    Thanks so much Paul, the info is fantastic!
     
  16. Tillie

    Tillie Well-Known Member

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    Thanks Paul for the fantastic summary. It will help a lot of people in the similar circumstances.

    One question if I may... how does the temporary jobseeker rules impact on the centrelink payments in this instance?

    By all means I am not familiar with all details of the jobseeker legislation, but somehow I thought that the asset test was temporarily lifted during this 6 month period. If indeed that is the case, would Archaron be able to get the jobseeker payment immediately and not only after he has spent his redundancy payment?
     
  17. Paul@PAS

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

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    No idea but typically a retrenched person is asked to provide a sep cert which Centrelink use to assess a payment start date. I know they have waived the cash holding rule (eg savings) and some other requirements at present. But (modified) assets and income tests remain. They would be able to advise on internal policy and temporary measures. The earliest possible application is always recommended
     
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  18. Archaon

    Archaon Well-Known Member

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    I won't be applying for jobseekers, plenty of people need it more than I.

    I have some savings and a guarenteed job to move into, as well as plans to get a Diploma! ;)
     
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  19. Tillie

    Tillie Well-Known Member

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    Fantastic Archaon that you do not need it. Looks like you can have your cake and eat it too, getting redundancy and walking to the next job straight away. :D

    Thanks Paul for sharing your knowledge. Other people might not be as lucky as Archaon and might benefit from your advice.
     
  20. Paul@PAS

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

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    Islay likes this.