Author: Jason Roccosalvo, Partner, TAG Financial Services
Last updated: 24th July 2020
The Federal Government must of read our TAG Super Update because yesterday afternoon they announced an extension of the early release of super program to 31 December 2020. There was no adjustment to the qualifying criteria for this program. Read our updated article below:
Following on from this week’s Federal Government update, let’s consider how COVID 19 continues to impact our super clients.
With JobKeeper here for a while longer, the Federal Government also announced on 23 July the extension of the early release of super program to 31 December 2020. There was no adjustment to the qualifying criteria for this program.
Unsurprisingly, the ATO will use various data matching methods to ensure your clients were actually eligible for the program. As advisers, we should ensure our clients are aware of this criteria.
Whilst times have been tough for many, there are opportunities you can help your clients take advantage of.
For example, you should consider those of your clients who have reached preservation age. COVID 19 has resulted in many individuals either having their hours reduced, lost their jobs, or been made redundant. For Individuals that have reached their preservation age – early release is a nice temporary measure. However, a client may be unwittingly triggering conditions of release which could allow for either:
- Access to some/all of their super as lump sums, or
- Ability to commence retirement phase income streams.
For many, this event will be more important in their financial future than the early release jolt of cash, with access to greater amounts of their super, more easily (and frequently) accessible, without the fear of repercussions from “big brother”.
These events may also allow advisers to implement withdrawal and re-contribution strategies as well with clients.
For those with clients who access (or are looking to access) the early release provisions, we should ensure sufficient documentation is retained to provide to the auditor to verify this authority has been given, to maintain the integrity in the system. No doubt, ATO data matching capabilities will be on the lookout for those flaunting these opportunities.
Again while no extension or changes have been made, it is clear (particularly in Victoria) we will be impacted for a significant period of time. The JobKeeper extension reflects these difficult conditions. Being able to justify/display how any rental relief decision was arrived, particularly with related party tenants, is vital to ensure SIS compliance – as well as business/tenant survival!
Consider the impact on the above for clients with large property holdings. While pension minimums are reduced for the 2020/21 year– what will the medium to longer term impact be on asset values (particularly as they are the driver for pension minimums) and also on rental yields.
It is important to remember as well, for those funds with related party loans, that loan terms must be either:
- Consistent with PCG2016/5, or
- Document how it is commercial.
With an extension by many banks of loan relief into 2021 – SMSFs should document the agreed relief with the lender (related party), and maintain this documentary evidence for audit purposes.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2020. Please do not reproduce without the expressed written consent of the author.