The recent Covid-19 pandemic has had devastating consequences for many businesses, particularly those who have had to stop trading since restrictions were imposed in March 2020. Not only are many self-employed people feeling the pinch, firms are being forced to close, or dramatically reduce their workforce.
This can leave employees in dire financial straits, at least in the short term until the economy begins to thrive again. In order to provide a temporary boost to personal finances, ATO has announced that eligible individuals can draw down some of their superannuation early.
Part of a suite of economic stimulus measures intended to kick-start the economy, early release super can provide a useful pot of additional money to get through the current lean time.
What amounts can be drawn down?
Aside from exceptional circumstances, superannuation usually can’t be accessed until an individual reaches pensionable age (also known as preservation age).
This varies from 55 to 65-years-old, depending on the date of birth. Under the Covid-19 economic stimulus measures, eligible individuals can apply for up to $10,000 for 2019/20, then up to an additional $10,000 for 2020/21.
Applications for super draw down relating to the 2019/20 financial year need to have been in by 30th June 2020. For 2020/21 applications, the submission must be made between 1st July 2020 and 24th September 2020.
Who is eligible for a Covid-19 related early release of superannuation?
In the first instance, individuals must be permanent residents or citizens of Australia. Temporary residents may also be eligible to claim, but need to satisfy specific criteria before they can be considered.
If you have any questions regarding your eligibility, we are able to help. Pherrus Financial Services are an established firm of accountants who are able to advise on all aspects of the Covid-19 economic stimulus measures.
In addition, potential applicants for early access to a portion of their superannuation fund need to satisfy one of the following criteria:
– you are eligible to claim one of the following benefits (note that you don’t have to be actively claiming):
* youth allowance for job seekers
* job seekers
* special benefit
* farm household allowance
* parenting benefit
* you are unemployed
– you were made redundant on or after 1st January 2020.
– your working hours were reduced by 20% or more after 1st January 2020.
– as a sole trader, your business either had trading suspended on or after 1st January 2020, or your turnover dropped by 20% or more.
Note that you don’t have to provide evidence that you meet any of these criteria, but that ATO may ask you to provide evidence in the future.
If you have previously accessed superannuation early for some other reason (for example, being unable to work due to injury or an illness), you can still apply for a Covid-19 related superannuation payment, provided you meet one of the criteria indicated above.
What happens if I’m not sure regarding my eligibility?
Although the criteria for eligibility are fairly clear-cut, it’s still possible that you may not be entirely sure whether you are able to apply.
A common cause of confusion relates to working out whether turnover has declined by 20% or more (for example, turnover may have declined by more than 20% on the previous quarter, but this may be due to a natural seasonal variation rather than a Covid-19 related decline).
Similarly, as a sole trader, you may have been able to continue working, albeit in a reduced manner, but still be eligible in some circumstances. We can advise on the eligibility of applications if you have any doubts regarding your individual circumstances.
We strongly suggest that you do not submit an application unless you are as sure as you can be that you meet the stated criteria.
ATO can check eligibility
ATO has access to the following sources of information, which they can use to check if your application is valid:
* tax returns.
* information from your super fund.
* payroll information.
* third-party data from relevant agencies.
If they have cause to suspect an ineligible application, it will not be granted. If a Covid-19 superannuation payment is subsequently found to have been claimed incorrectly, it will become income that is assessed for tax purposes (the superannuation accessed correctly through the Covid-19 economic stimulus initiative is exempt from tax) and will need to be included on your tax return.
The ATO can also prosecute individuals if there is evidence that the superannuation was claimed fraudulently.
Note that payments can only be made from your superannuation fund. If you are applying for superannuation held by the ATO, it will need to be transferred to your superannuation fund before you can access it.
At Pherrus Financial Services, we are committed to helping all our clients through the pandemic to the best of our abilities. Please get in touch to find out more about the Covid-19 economic stimulus measures, as well as for in-depth advice on how you might benefit from them.