Access your super account during COVID19 - can it help sole traders?
Updated: Mar 31, 2020
As of 22 March 2020, the Australian government have announced new measures to assist individuals facing increasing uncertainty during the economic downturn caused by COVID19.
Specifically in relation to your superannuation account, you may be eligible to receive up to $10,000 during this current 2020 financial year and then up to an additional $10,000 during the next financial year (2021FY).
But should you do it? We'll explore that a little later on, for now, lets have a look through the announcement in a little more detail.
These payments will be tax free.
These payments can be used however you see fit, and can even be returned to your superannuation account (within your contribution cap limit and other rules) if you so choose.
In order to get your payment, you'll need to apply to the ATO via your MyGov account for temporary early access to your superannuation. This will likely be found in the 'Manage' section with your 'Super' menu option.
So long as you meet the relevant criteria (see further below for that criteria), the ATO will then turn around and provide a determination directly to the trustee of your superannuation account that which allows them to make that payment to you.
The applications will be made available as from the middle of April 2020.
But let's not get ahead of ourselves though! If you're a member of an SMSF, there are some matters that need to be considered prior to making this application.
1. Does your deed (the rules for your SMSF) allow for temporary release of super? Most deeds will, but don't just assume it does. You may just have to do the boring thing of reading the deed to make sure.
2. The ATO must first provide the relevant written determination (authority) for that payment to be made, and then the payment can happen after that.
3. Do you meet the criteria that the Government have announced? That is, on or after 1 January 2020:
- You're unemployed - OR -
- You're eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single & partnered payments), special benefit or farm household allowance - OR -
- If you're a sole trader - your business has been suspended or there was a downturn in your turnover of 20 per cent or more (otherwise if you're an employee, you were made redundant or you've had your hours reduced by 20% or more)
4. For the sake of your record keeping, and for your auditor's purpose, you should strongly consider creating a minute of meetings of the trustee to determine the payment was made owing to temporary early access to superannuation.
Finally, let's have a think about where you should do it or not.
Sure, if you really need it now, then you'll get the cash assuming there is cash available in your SMSF or superannuation account. But if you have to sell down assets to generate cash, it's more than likely that will you be worse off in the future owing to any possible capital losses you are incurring as a result of selling assets when the market values are quite low. If these circumstances change this point might become moot.
Also, the purpose of superannuation is for you to benefit after you've retired. Pulling out money now, can potentially have a significant impact on your final member balance available when that time comes. In other words, you're not allowing compound (time) earnings to do it's magic for you.
Keep the above in mind when you're making your decision - it's a tough call to make but only you can decide what's best for you during these tough times.
Otherwise, if you need help to make that decision, it's much better to seek personal financial advice.