COVID-19 - frequently asked questions

Self-managed super funds

   Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the information in this Guide applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

 

Answers to questions on:

Signature requirements for financial statements

Question: I usually attend my accountant's premises to sign my SMSF's financial statements. However, I am unable to attend in person to sign them this year due to COVID-19. How can I meet the signature requirements?

Answer: There are options available. Under the super laws, SMSF trustees are required to sign their SMSF's financial statements before finalising their fund's audit each income year. COVID-19 impacts such as social distancing or isolation requirements or your tax agent or accountant working from a home office may prevent you from signing your SMSF's financial statements in person this year.

Alternative options available for signing the financial statements consist of returning a signed scanned copy to your tax agent or accountant by email or using an electronic signature such as a digital signature. Digital signatures should be provided:

  • using a secure system, typically through an established third-party provider
  • in a way that clearly identifies the trustee signing and indicates the approval you are providing.

A secure system would include a system that requires a personal identification number, access code or password to use.

If you can't use these alternative options to sign your financial statements, your agent or accountant should post the financial statements to you and you will need to sign them and arrange to return them to your agent by post.

You will not meet the signature requirement if you only acknowledge the financial statements by email or over the phone.

This question was last updated on 23 April 2020.

Early access to super

Question: One of the members of my SMSF wants to apply for release of their super under the COVID-19 early access arrangements, what do I do?

Answer: Your member can apply for release of their super under the COVID-19 early access arrangements through myGov. We will then issue them with a determination advising of their eligibility to withdraw an amount. When you receive the determination from your member, you will be authorised to release the amount of super stated in the determination. If the current balance of the member's account is less than the amount approved in the determination, you can release the lesser amount.

The amount is not subject to PAYG withholding and does not need to be reported on a PAYG payment summary.

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This question was last updated on 17 April 2020.

Question: If my SMSF member does not meet the COVID-19 early access arrangements, is there any other way they can access their super?

Answer: Subject to the terms of your trust deed, your member can access their super when they:

They can also access super in some special circumstances, including:

  • compassionate grounds - subject to certain limitations
  • severe financial hardship - subject to certain limitations
  • terminal medical condition
  • temporary incapacity - subject to certain limitations
  • permanent incapacity
  • super less than $200 - subject to certain limitations.

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This question was last updated on 17 April 2020.

Related party limited recourse borrowing arrangement relief

Question: My SMSF has a compliant limited recourse borrowing arrangement (LRBA) in place with a related party. Would the non-arm's length income (NALI) provisions apply if the related party offers repayment relief to the SMSF trustees because of COVID-19?

Answer: We understand that temporary repayment relief may be offered in relation to an existing LRBA between an SMSF and a related party due to the financial effects of COVID-19.

If the repayment relief reflects similar terms to what commercial banks are currently offering for real estate investment loans as a result of COVID-19, we will accept the parties are dealing at arm's length and the NALI provisions do not apply. For example, these terms currently include temporary repayment deferrals for most businesses of up to 6 months, with unpaid interest being capitalised on the loan.

The parties to the arrangement must also document the change in terms to the loan agreement and the reasons why those terms have changed. It is also expected that there is evidence that interest continues to accrue on the loan and that the SMSF trustee will catch up any outstanding principal and interest repayments as soon as possible.

Any further repayment relief needed due to the continued effects of COVID-19 should be reviewed at the end of the agreed deferral period and remain in line with what the commercial banks are offering at that time.

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This question was last updated on 17 April 2020.

Temporarily reducing superannuation minimum payment amounts

Question: I am retired and receive an account-based pension from my SMSF. My account-based pension balance has been badly affected by the losses in the financial market because of the COVID-19 crisis. I would like to reduce my pension payments. Does the SMSF still need to pay me the minimum amount that was calculated based on my account balance at 1 July 2019?

Answer: No. You can reduce the minimum amount your SMSF pays you by up to 50% of what is otherwise required based on your account balance at 1 July 2019 for the 2019-20 financial year. Certain superannuation pensions and annuities are subject to rules about minimum and maximum amounts paid in a financial year. To assist retirees, the government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% in the 2019-20 and the 2020-21 financial years.

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This question was last updated on 17 April 2020.

Question: I am retired and receive an account-based pension from my SMSF. My account-based pension has already paid me more than the reduced minimum annual payment required for the 2019-20 financial year. Is my SMSF required to continue making pension payments to me for the remainder of the year?

Answer: If a member does not want to receive any further pension payments they can cease being paid the pension for the remainder of the year. This has to be communicated to the Trustee. It is important that the SMSF trustee considers its trust deed and documents any changes and the reason for the change. This could be recorded in a minute or other contemporaneous document.

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This question was last updated on 17 April 2020.

Question: I am retired and receive an account-based pension from my SMSF. My account-based pension has already paid me more than the reduced minimum annual payment required for the 2019-20 financial year. Is the amount over the minimum considered superannuation lump sum amounts?

Answer: Pension payments that you have already received cannot be re-categorised. Accordingly, payments made from your account-based pension in excess of the new reduced minimum annual payment required for the 2019-20 financial year are pension payments (that is, superannuation income stream benefits) for the year and not superannuation lump sums.

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This question was last updated on 17 April 2020.

Question: I am retired and receive an account-based pension from my SMSF. Does my SMSF trustee need to document a reduction in my pension payments if it occurs in accordance with the reduced minimum annual payment for the 2019-20 and 2020-21 financial years?

Answer: Yes, it's important your SMSF trustee documents the change and the reason for the change. This could be recorded in a minute or other contemporaneous document.

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This question was last updated on 17 April 2020.

Question: I am retired and receive an account-based pension from my SMSF and an APRA-regulated industry fund. Can I still use the reduced minimum annual payment if I get a pension from another fund?

Answer: If you are receiving multiple pensions from your SMSF or from other super funds, the reduced minimum annual payment can be used to calculate the minimum pension required to be paid for each eligible pension you receive.

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This question was last updated on 17 April 2020.

Question: Does the reduced minimum annual payment for account-based pensions and annuities, allocated pensions and annuities required for the 2019-20 and 2020-21 financial years also apply to market linked pensions?

Answer: Yes, the reduction in the superannuation minimum annual payment requirements applies to market linked pensions (also referred to as term allocated pensions or TAPs).

Market linked pensions have a minimum and maximum payment limit, and the actual pension payment drawn for the year must be within these limits. The minimum payment limit, which is normally 90% of the pension amount that is worked out under a formula, has been reduced to 45% for the 2019-20 and 2020-21 financial years as part of the government's temporary reduction of superannuation minimum payment amounts.

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This question was last updated on 17 April 2020.

Question: My SMSF now has a considerable unrealised capital loss as a result of the recent downturn in the global economy. Can I re-assess my member's super benefits that support the pension to work out the reduced minimum annual payment amount?

Answer: The changes only provide for a halving of the minimum annual payment requirement as applicable to the pension account balance at:

  • 1 July 2019 (or a later commencement date during the year) for the 2019-20 year
  • 1 July 2020 (or a later commencement date during the year) for the 2020-21 year.

Regardless of losses incurred, you cannot recalculate the pension based on a lower account balance of the fund at another point in time.

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This question was last updated on 17 April 2020.

Question: I am a trustee of an SMSF. I have paid more than the reduced minimum annual payment amount for 2019-20 financial year to a member of my SMSF. Can the member put the amount above the reduced minimum annual payment back into the SMSF?

Answer: Your member can put the amount back into the SMSF as a superannuation contribution if they are eligible to make superannuation contributions, subject to any other rules or limits such as contributions caps.

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This question was last updated on 17 April 2020.

Providing rent relief

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 effects of COVID-19. Charging a related party a price that is less than market value is usually a contravention. Given the effects of COVID-19, will the ATO take action if I do this?

Answer: Some landlords are giving their tenants rent relief as a rent reduction, waiver or deferral because of the financial effects of 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 if an SMSF gives a tenant - even one who is also a related party - a temporary rent reduction, waiver or deferral because of the financial effects of COVID-19 during this period.

If your SMSF holds an interest in an interposed entity such as a non-geared company or unit trust and that interposed entity leases property to a tenant, we will not treat the investment in the interposed entity as an in-house asset for the current and future financial years as a result of a deferral of rent being provided to the tenant due to the financial effects of COVID-19.

If there are temporary changes to the terms of the lease agreement in response to COVID-19, it is important that the parties to the agreement document the changes and the reasons for the change. You can do this with a minute or a renewed lease agreement or other contemporaneous document.

This question was last updated on 23 April 2020.

Super balance losses

Question: My super balance has been affected by downturns in the global economy so my SMSF needs to sell an asset of the fund at a loss. Can my SMSF claim this loss against the income it earned this year or can I claim it in my personal tax return?

Answer: Unrealised losses due to changes in the market value of investments are not deductible in calculating your SMSF's net taxable income for the year. However, a realised capital loss incurred by your SMSF from the sale of one of its CGT assets can be offset against realised capital gains from other CGT assets in the current year. If your SMSF's capital losses exceeds its capital gains for the income year, this net capital loss cannot be deducted from your SMSF's income but it can be carried forward and applied against future capital gains.

Losses incurred by your SMSF are not available to you to deduct in your own personal tax return.

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This question was last updated on 17 April 2020.

SMSF residency

Question: After temporarily residing overseas for less than two years, we were about to return to Australia but became stranded overseas because of the COVID-19 health crisis. This forced absence means we will be out of Australia for more than two years. What will this mean for our SMSF?

Answer: An SMSF must be an Australian super fund to be a complying fund and receive concessional tax treatment.

To be an Australian super fund an SMSF must meet three residency conditions, see Check your fund is an Australian super fund . The second and third conditions are relevant in this case.

The COVID-19 health crisis has resulted in many countries imposing travel bans and restrictions and a high degree of uncertainty generally around international travel.

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, we will not apply compliance resources to determine whether the SMSF meets the relevant residency conditions.

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This question was last updated on 3 April 2020.

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 an 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. This compliance approach also applies where the SMSF exceeded the 5% in-house asset threshold as at 30 June 2019 but has been unable to rectify the breach by 30 June 2020.

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This question was last updated on May 2020.

Investment strategies

Question: The downturn in the market has affected my SMSF's investment strategy. What do I need to do?

Answer: Trustees must prepare and implement an investment strategy for their SMSF, which they must then give effect to and review regularly. The strategy should be reviewed at least annually, and you should document that you've undertaken this review and any decisions arising from the review. Certain significant events, such as a market correction, should also prompt a review of your strategy and may require updating your investment strategy.

If the assets of an SMSF or the level of investment in those assets fall outside of the scope of your investment strategy, you should take action to address that situation, which could involve adjustments to investments or updating your investment strategy. We don't consider that short term variations to your articulated investment approach, including to specified asset allocations whilst you adjust your investments, constitute a variation from your investment strategy.

All investment decisions must be made in accordance with the investment strategy of the fund. If in doubt, trustees should seek investment advice.

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This question was last updated on 20 March 2020.

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You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).