Page last updated on 20/01/2020
What do the changes mean?
- If eligible, you could apply to access up to $10,000 before 30 June 2020. Applications for these funds closed 30 June 2020.
If eligible, you could also apply to access up to $10,000 after 1 July 2020 and on or before 31 December 2020. Applications for these funds closed 31 December 2020. Processing and payment of these applications by super funds may occur into January 2021.
Amounts released under COVID-19 early release of super are not taxable. The ATO has stated that there is no need to include these amounts in a person's tas return.
There was no requirement by the ATO to attach evidence to support an application. However, people still need to retain documents that support their eligibility for each application they made. There may be tax and fines payable for obtaining COVID-19 early access to super when you were ineligble to do so.
People are still able to obtain early access to their super on either severe financial hardship or compassionate grounds.
What do you do differently?
It is expected that there may be some auditing by the ATO of COVID-19 early release of super applications during tax time.
- There will be people who accessed their super when they were not eligible. The ATO has announced that they will be checking the accuracy of applications and where they are concerned an application may not have been genuine, they will review it and take action including:
- Reversing their approval of the application made under COVID-19 early release of super making the amount released assessable income and therefore tax will be payable on it.
- Issuing an administrative penalty of more than $12,000 for each false and misleading statement made.
- If the ATO has found that your client was not eligible to access their super but still did, it may be necessary to assist them to:
- Negotiate a repayment arrangement on the assessed tax amount due.
- Negotiate the fine given their circumstances
There are several possible arguments that may apply if your client applied for early release when they were allegedly not eligible. The arguments would be used to reduce any penalty. You would need instructions from your client to check if the argument would apply:
- Your client’s desperation is a relevant consideration. People applying for their super to avoid family violence, eviction or other serious consequences.
- There are also a range of compassionate grounds which would be relevant.
- There would be people who relied on the ATO to check the form and reject if they were not eligible. This is a reasonable expectation as this is what happens with Centrelink (for example).
- The ability to understand English and read the form is a relevant matter.
- There will also be people who are just confused about how or what super is (and see point 5 below which would also have been misleading).
- The Prime Minister and Treasurer repeatedly told the public that super was “their money”. Many people relied on this statement. (Super is not your money it is in fact held in trust for your retirement (with some exceptions)).
If the ATO has found that your client was not eligible and your client disagrees with this then they can access the ATO dispute resolution process. More information about this here.
Clients who applied and their super balance has fallen below $6,000:
- If the super balance falls below $6,000 following early release, some people may lose the insurance cover they had in their super.
- If your client already had insurance outside their super, they may not need the insurance in super.
- Do have a discussion with your client about whether the insurance was suitable. In general, if your client has no dependents – the insurance may not be needed. The insurance premiums do erode small balances so it is important to consider if it is necessary.
- If your client wants their insurance cover back you can help them to:
- Consider whether the insurance is needed in super or can be purchased directly from an insurer. Encourage your client to shop around.
- ask their super fund for details about their insurance and the cost.
- If the client wants insurance they will need to apply.
Clients who applied and who still have some or all of the funds:
- If your client still has some or all of the funds released under covid-19 early release of super then you can advise the client on the best priorities for the money given their circumstances. For example, it could be used for essential costs such as rent or to settle debts on a lump sum basis
- If your client was not eligible to access the super then consideration should be given to return it to the super fund if it is not desperately needed.
Australian Taxation Office: Options for resolving disputes
Choice – Should you access your super early? Here’s what to consider? See table and information
Temporary residents were not eligible to apply for COVID-19 early release of super in the 2020-21 financial year.
If your client has worked and earned super while visiting Australia on a temporary visa, they can apply to have this super paid to them as a Departing Australia Superannuation Payment (DASP) after they leave. More information about eligibility and how to apply here.