Govt. lets people take money out of super

https://www.brisbanetimes.com.au/po...o-take-20-000-from-super-20200322-p54cmt.html

This is rather interesting. I would have thought it would be a terrible time to withdraw money from super. But I know a lot of people that are trying to work out how to do this in order to help pay down their mortgage.

 

It IS a terrible time to take money out of super - and if people do it en masse, watch the market plummet further.

 

Possibly why Macquarie and AMP fell hard today.

 

Taking money out of super is a choice of last resort @sharon. The younger you are the worse the decision but not a good idea at any age.

 

It is only $10,000 this FY and the same FY next year.

Surely, most Super funds would have $10,000 in cash?

So no need to sell anything.

 

Unless the amount is trivial, yes, because they have to keep the fund investment proportions in line with their members wishes.

Say you've got $100K split 25% each shares, bonds, property and cash. You withdraw $20K. Unless you agree to a rebalancing, the fund has to sell $5K each of shares, bonds, property to get back to the contracted split, now 4x$20K. Arguably agreeing to a rebalancing and waiting for a recovery might be a better strategy ... but then it might not be.

 

Could be taken as $10K in June 2020 and $10K in June 2021.

Plus it is voluntary. In other words, it is case-by-case decision for each person.

I really don’t see a problem with it.

 

I would have taken $10k out of the cash sitting in a cash management trust in my super to pay down a mortgage, but don't qualify (yet ).

Eligibility is here: Early access to superannuation | business.gov.au

 

I can see some taking the $10k tax free from super and then making a $10k non concessional contribution.

 

The conditions to seek release are fairly broad but I would argue it may be difficult to both meet the conditions and also be fianncially able and willing to recontribute. They would also likely encounter extreme difficulty in doing this twice. (Before and after 30 June). In a earlier post I did note some may apply for a determination literally the day prior to return to work and this is allowed (see underlined) and yes they could recontribute this and use the catch up contribution cap.

A person can apply for a determination to have up to $10,000 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]

 

What would be the point in that?

 

A deduction of $10K in the 2020 year and a higher tax refund at up to 47% v's your fund balance reducing by 15% tax and being $1500 less. I was surprised the legislation didnt have an avoidance test that would prevent a concessional contribution after release

 

The potetnial tax deduction when it goes back in.

 

I see, so claiming the deduction and making it concessional? Surely there would have to be something that would prevent that though, if you have to show financial difficulty you wouldn't be able to do that strategy anyway as you would need the money now.

 

Not necessarily

 

At the time of the release request you do have to be affected sufficent to make the request. But you could be planning to return to work the very next day and feel putting it back is a benefit. No problem subject to contribution caps.

I even had it underlined in the first example and in the second (after OR) there is no such at the time test. It applies an event based test to eligibility. It is not need based.!!!

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]

 

I do question what "turnover" test applied to a sole trader. Is that a week, a month or the year but the year wont have completed ? I think Govt will let you feel suitably affected and wont raise a concern.

So Mary the hairdresser gets Coronavirus in June and cant work through to the first week of July. Her turnover is $0. She is then well and knows she is fit to start work on 14th July. On the 20th July she applies for a $10K release. No problem. She could likley take 2 x $10K provided she is well enough to remember to do the first one before 30 June. Mary uses the suspension rule in each case.

 

This was my question and estimation too.

Reading the rules, it says the sole trader can "self verify" a drop in income, whatever that means.

 

I wonder how they define 'unemployed'.