The SMSF Association’s COVID-19 response

Updated as of 06 April 2020 

The SMSF Association as a priority is actively monitoring the economic uncertainty resulting from COVID-19. We will provide updates as they are announced in conjunction with SMSF resources to help you navigate the challenges ahead.

To assist us with best directing our resources to support you during this time, we would love to hear from you. Please provide feedback here.

Resources to help you during this time

Latest updates from the ATO

SMSF Deferrals

  • The ATO announced that SMSF trustees or their tax agents can request an extension for lodgement of their SMSF’s 2019 annual return, if they require more time due to COVID-19.

SMSF Loan relief

  • The ATO have confirmed to the SMSF Association that their compliance approach for the 19-20 and 20-21 financial years will not take action where an SMSF offers a related party, who has a compliant loan agreement in place, any concessions that result from the impact of COVID-19.

SMSF Residency

  • The COVID-19 health crisis has resulted in many countries imposing travel bans. If the individual trustees of an SMSF or directors of its corporate trustee are stranded overseas due to COVID-19, in the absence of any other changes in the SMSF or the trustees’ circumstances affecting the other conditions, the ATO will not apply compliance resources to determine whether the SMSF meets the relevant residency conditions.

The SMSF Association is pleased to announce that the ATO has responded to our requests for guidance regarding rent concessions and in-house assets. Please see their guidance below:

Temporarily reducing rent

Question: My SMSF owns real property and wants to give my tenant – who is a related party – a reduction in rent because of the financial impacts of the COVID-19. Charging a related party a price that is less than market value is usually a contravention. Given the impacts of the COVID-19, will the ATO take action if I do this?

Answer: Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of the COVID-19 and we understand that you may wish to do so as well. Our compliance approach for the 2019–20 and 2020–21 financial years is that we will not take action where an SMSF gives a tenant – who is also a related party – a temporary rent reduction during this period.

In-house asset restrictions

Question: The downturn in the share market may result in the fund’s in-house assets being more than 5% of the fund’s total assets. The in-house asset rules would be breached. What do I need to do?

Answer: If, at the end of a financial year, the level of in-house assets of a SMSF exceeds 5% of a fund’s total assets, the trustees must prepare a written plan to reduce the market ratio of in-house assets to 5% or below. This plan must be prepared before the end of the next following year of income. If an SMSF exceeds the 5% in-house asset threshold as at 30 June 2020, a plan must be prepared and implemented on or before 30 June 2021. However, we will not undertake compliance activity if the rectification plan was unable to be executed because the market has not recovered or it was unnecessary to implement the plan as the market had recovered.

Visit the ATO’s website to read more of their COVID-19 questions and answers. 

The Australian Taxation Office has also announced a range of administrative support measures, more details can be found here.

Government Announcements:

On Sunday 22 March 2020, the Federal Government announced Economic Stimulus Package No.2

Key superannuation measures include:

  • Temporarily reduce superannuation minimum drawdown rates

    The Government is temporarily reducing superannuation minimum drawdown requirements for account based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets. 
    Click here to view the fact sheet.

  • Early release of superannuation

    The Government will allow individuals in financial stress as a result of the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.

    Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for another three months. They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments. 
    Click here to view the fact sheet.

    The ATO has released the following details regarding an early release for SMSF members:

    If you are eligible, you can apply through myGov from mid April. You will then be issued with a determination advising of your eligibility to release an amount. When you receive the determination, you will be authorised to make the payment.

    Trustee responsibilities for early release of super
    As an SMSF trustee, you are responsible for your and your members’ retirement savings. Please make sure you are eligible for early release of super before you release any funds from your SMSF. Click here to read more in our latest article here.

  • Reducing social security deeming rates

    On top of the deeming rate changes made at the time of the first package, the Government is reducing the deeming rates by a further 0.25 percentage points to reflect the latest rate reductions by the RBA.

    As of 1 May 2020, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent.The change will benefit around 900,000 income support recipients, including Age Pensioners. 
    Click to view the fact sheet

  • Other economic stimulus measures
    There is a range of other economic stimulus measures available, in particular for small businesses to manage cash flow and retain employees. These measures include:

  • Boosting Cash Flow for Employers

    The Government is enhancing the Boosting Cash Flow for Employers measure it announced on 12 March 2020. The Government is providing up to $100,000 to eligible small and medium-sized businesses, and not for-profits (NFPs) that employ people, with a minimum payment of $20,000. These payments will help businesses and NFPs with their cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff. This measure will benefit around 690,000 businesses employing around 7.8 million people, and around 30,000 NFPs (including charities).

    The Government has budgeted $32 billion for this measure and many SMSF Association members would be eligible to receive up to $100,000. Click here for the fact sheet.

    Legislation to give these measures effect is expected to be introduced into Parliament in late March 2020.

    The Australian Taxation Office has also announced a range of administrative support measures, more details can be found here.

How we’re working to support you:

Advocating to Government

  • We have made representation to the Government, for temporary relief to be put in place for minimum pension withdrawals. Click here to read that letter.
  • We are in the process of, and will continue to represent member concerns to the Government and ATO. We will remain alert to further opportunities to request relief (financial or otherwise) for SMSF members.

Health announcements

During this period, we ask that you follow the recommendations and advice on the Australian Federal and State Government Health Departments and the World Health Organization websites.