The Government’s has implemented its early release of super plan as part of their COVID-19 stimulus measures to assist SMSF members experiencing financial hardship.
Much has been written about the benefits of the plan designed to help those in dire financial straits. It is hoped the measure has a trickle-down effect that will, in turn, support the business community and the economy overall.
The devil of any well laid out plan is always in the detail, but the ink hasn’t yet dried on the fine print that provides information on how this will work in practice.
With conditions changing so rapidly, it’s important to take a common-sense approach to compliance that doesn’t place more pressure on SMSF trustees and ensures SMSF compliance.
The myGov gate will open on 20 April 2020 to allow SMSF members with sufficient balances to apply for early release of up to $10,000 in the 2019/20 financial year.
A second payment of $10,000 will be accessible from 1 July 2020 until the gate finally closes on 24 September 2020.
The payments do not incur tax and any amounts released will not affect Centrelink or Veteran’s Affairs payments.
There are strict eligibility criteria that members must satisfy to enable access to an early release of super:
- They are unemployed.
- They are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance.
- On or after 1 January 2020, either:
- they were made redundant
- their working hours were reduced by 20% or more
- if they are a sole trader, their business was suspended, or there was a reduction in their turnover of 20% or more
The entire scheme is based on members self-assessing to confirm eligibility for early access of their super.
Also, they are not required to attach evidence to support their application on the myGov website but are required to retain records and documents for future proof.
SMSF Audit Requirements
Auditing funds for the 2020 and 2021 financial years will result in SMSF auditors seeing transactions of up to $10,000 classified as COVID-19 early release for the first time.
SMSF auditors will have to confirm the amount taken meets the COVID-19 early release criteria where the member does not meet a condition of release.
SMSF auditors are not interested in finding out the personal circumstances of members but are required to obtain sufficient appropriate audit evidence to support their audit opinion.
The question is what evidence will be acceptable at audit?
SMSF Audit Evidence
SMSF members are encouraged to ensure they keep all evidence and documentation in line with ATO requirements.
While this should be acceptable audit evidence, providing approval from the myGov website or a declaration signed by the SMSF trustee may also be sufficient.
Without being too prescriptive, there may be more changes on the way which will affect these requirements.
Any other course of action for SMSF auditors, such as accepting a $10,000 withdrawal at face value, can only be done through the discretion and instruction of the ATO.
While we live in unprecedented times, SMSF auditors are still required to meet their professional obligations to ensure a fund complies with the SIS legislation.
The COVID-19 landscape is changing daily, but it’s still important to consider the SMSF housekeeping now so the audit is hassle-free later on.
There’s no doubt that being on the front foot by working with your SMSF auditor will ensure funds get through this trying time and across the SMSF compliance line.