Damian Ryan, Tax Partner, Superannuation & Funds, KPMG Australia
As highlighted by Damian Ryan, the extension of the measure until 31 December 2020 will allow more time for individuals who may still be financially impacted by COVID-19.
The Federal Government is extending the application period for the early release from superannuation measure to increase the scope for individuals who may still be financially impacted by COVID-19 to access early release in the coming months.
Those eligible individuals affected by the adverse economic effects of COVID-19, can access superannuation early and tax-free.
It will be extended from 24 September 2020 to 31 December 2020.
Eligible Australian and New Zealand citizens and permanent residents were able to access up to $10,000 of their superannuation before 1 July 2020. They can access a further $10,000 until 31 December 2020.
The initial announcement, made earlier this year, allowed qualifying individuals to access up to $20,000 of their superannuation savings tax free in two withdrawals of up to $10,000 each, one in FY 2019-20 and one in FY 2020-21.
The ATO has released guidance to clarify the tax treatment of these amounts. No withholding is required by the superannuation fund, the normal proportioning rules are to apply, and the amounts are tax free in the hands of the recipient.
Integrity guidance has also been issued to warn those recipients who were not eligible, but applied for early release to expect compliance activities.
Some of the interesting observations include:
- the impact of these measures on low balance members, particularly, younger members and women, that have eroded their superannuation balances, with significant consequences for their future retirement outcomes;
- the impact of these measures on low balance members who have withdrawn all of their balance such that they have lost their insurance cover within superannuation; and
- the administrative cost on funds and their administrators of administrating the temporary measures.
Temporary reduction in minimum drawdowns – already announced
The Government has also provided assistance by temporarily halving superannuation minimum drawdown requirements for the 2019-20 and 2020-21 income years, reducing the need to sell investment assets to meet these requirements.
Reduction in social security deeming rates – already announced
The Government has also provided assistance by reducing the upper and lower social security deeming rates to 2.25 per cent and 0.25 per cent respectively from 1 May 2020, taking into account the low interest rate environment and its impact on income from savings.
This article was originally published on KPMG Tax Now, KPMG Australia’s subscription tax news service for clients.