SMSFs – A new financial year in COVID-19 times
As a new financial year unfolds, the COVID-19 pandemic continues to impact everyone’s lives in so many ways. During these unprecedented times it is important to ensure trustees continue to meet their annual regulatory obligations and remain complying throughout the year ahead.
Reduced minimum pension requirements
The 50% reduction in the minimum pension requirement that was announced on 24 March 2020 will continue to apply in the 2020-21 financial year as follows:
|Age at 1 July 2020||Reduced Minimum Percentage|
|65 – 74||2.5%|
|75 – 79||3%|
|80 – 84||3.5%|
|85 – 89||4.5%|
|90 – 94||5.5%|
|95 and over||7%|
Tip: If you have direct debits in place from your SMSF bank account, you may wish to review these to account for the reduction in the minimum pension.
COVID-19 early release of super
For those that have been adversely financially impacted due to COVID-19 the early access of superannuation continues this financial year, provided the eligibility criteria is met.
You will be able to apply online through the myGov website (https://my.gov.au/) to access up to $10,000 of your superannuation before 24 September 2020.
To apply for early release of your superannuation, you must satisfy one or more of the following requirements:
- You are unemployed.
- You 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, any of the following happened:
- You were made redundant.
- Your working hours were reduced by 20% or more.
- You were a sole trader and your business was suspended or your turnover decreased by 20% or more.
After applying through myGov, the ATO will issue you with a determination advising of your eligibility to release an amount. Only once your SMSF receives the determination from you, will the trustee be authorised to make the payment.
Catch-up concessional contributions
From 1 July 2018 if you had a total superannuation balance of less than $500,000 on 30 June of the previous financial year, you may have been entitled to start accruing the unused portion of your $25,000 concessional cap. The unused concessional cap can then be added to your current year cap thereby allowing a concessional contribution of over $25,000 in the 2020-21 financial year.
From 1 July 2020 spouse contributions can now be made for spouses aged between 67 to 75 (up to 28 days in the month after the spouse turns 75). The work test will still need to be met by the spouse prior to the spouse contribution being made.
Work test abolition for individuals aged 65 and 66
From 1 July 2020 people aged between 65 and 66 can make voluntary contributions (previously restricted to people below 65) without meeting a work test. This applies to both concessional and non-concessional contributions.
Bring forward non-concessional contributions for those aged 66 to 67 – not yet legislated
Unfortunately, at the time of writing this article, we are still awaiting the passing of the legislation to enable those individuals turning 66 and 67 to trigger the non-concessional bring forward rule.