As a part of the second round of COVID-19 stimulus, the government allowed individuals in financial distress to access a tax-free payment of up to $20,000 from their superannuation. While it may be a lifeline for many in these harsh economic times, before you take up this early release offer, it is best to consult a qualified professional about eligibility and the potential future impacts this may have on your retirement as well as other options available.
If you’re thinking of consulting a qualified professional, but don’t have an existing relationship with a financial adviser, you may now be able to go and see your registered tax agent to get the advice that you need. ASIC has provided a temporary AFS licensing exemption to allow registered tax agents to provide certain financial product advice to their existing clients about the early release of super under the Coronavirus condition.
To qualify for the exemption, other conditions include unsolicited contact, maximum advice fee of $300, Record of Advice requirements, and disclosure of potential conflicts of interest, commissions and remuneration. The exemption only applies to registered tax agents who are neither an AFS licensee nor a representative of an AFS licensee. If your tax agent is already authorised under an AFS licence to provide this type of financial product advice, then they are required to comply with the providing entity relief requirements in the Instrument.
The ATO will be accepting applications for early release of super by individuals impacted by COVID-19 from 20 April 2020. An individual can make one application to access up to $10,000 (tax-free) in the 2019-20 financial year (ie by 30 June 2020). A second application for up to $10,000 can be made in the 2020-21 year (ie from 1 July 2020) until 24 September 2020.
Applications can either be made online through the myGov website or over the phone with the ATO for those unable to access online services. The application itself requires the person to certify that they are eligible and includes information about the consequences of making false applications.
The ATO has recently run a social media campaign asking people to observe the spirit of the legislation and only apply to release their super to deal with the adverse economic effects of COVID-19. It notes that taxpayers should not withdraw their super early and recontribute it to gain a personal tax deduction. Other methods of taking advantage of early release that have been floating around in mass media including salary sacrifice schemes would also presumably not be acceptable.