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Trustees warned against using claims of release loopholes

Peter Burgess
Aidan Curtis
03 April 2020 — 1 minute read

An SMSF administrator has advised trustees to reconsider applying for early release of super to simply obtain tax benefits from the government’s COVID-19 relief measures. 

Temporary early access to super was one of several changes made to superannuation as a part of the government’s second stimulus package to offset the economic effects of the coronavirus outbreak.

Eligible members can apply for an early release of up to $10,000 in the 2019–20 financial year through the myGov website on 20 April.

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A second payment of up to $10,000 will be available from 1 July 2020, and members will have until 24 September to apply.

Before applying for early access, SMSFs will need to consider how they will comply with the Superannuation Industry (Supervision) Regulations 1994 (SISR) and how they will be audited.

According to SuperConcepts, some SMSFs might even be looking to exploit claims loopholes that could see them obtaining tax benefits from the scheme.

SuperConcepts general manager of technical services and education Peter Burgess has advised that SMSFs remember the compassionate purposes behind these early-release measures.

“We are hearing about people who either voluntarily or involuntarily agree to reduce their hours by 20 per cent or more for what could be a short period of time, and then make salary sacrifice contributions to their superannuation fund,” Mr Burgess said.

“They then apply to have $10,000 released from their superannuation fund in this financial year and a further $10,000 released in the next financial year before 24 September, under the government’s new COVID-19 compassionate ground condition of release.

“Depending on the individual’s income and their available concessional contribution cap space, this can result in a material tax saving for the individual.

“We need to remember the purpose of this new compassionate ground condition of release is to provide financial relief for those impacted by COVID-19; it shouldn’t be seen as an opportunity to embark on tax arbitrage strategies.”

SuperConcepts noted that funds including SMSFs will need to report amounts released under “this new compassionate ground condition” to the ATO.

It also said, for SMSFs, there is an existing label on the SMSF annual return which will need to be used for this reporting.

“In situations where an individual is salary sacrificing to superannuation, but also has amounts released from their superannuation fund under this new condition of release, the ATO may scrutinise the individual’s claim of reduced hours and may check whether the reduction in their income, as reported in their personal tax return, warranted a compassionate grounds release,” Mr Burgess said.

“It’s also worth noting the application for release is likely to involve the completion of an online ‘approved form’, which means penalties apply to false and misleading statements.

“It will be difficult to justify a claim for the early release of some of your superannuation on COVID-19 compassionate grounds if you are making salary sacrifice contributions to your fund.”

Trustees warned against using claims of release loopholes
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