The coronavirus has had such an enormous economic effect on the Australian public that many things once considered normal are no longer so.
People’s jobs have been hit particularly hard, which has led to the federal government invoking financial relief measures never seen before. And it does stand to reason superannuation was always going to be one lever it could pull to alleviate some of the financial stress.
To this end, the most noticeable measure has been the ability for individuals to gain early access to $10,000 of their retirement savings in the 2020 and 2021 financial years.
But of course any measure is only as good as its execution and this aspect required the regulator’s involvement. It was determined a different procedure was needed for SMSFs, most likely due to their different trustee structures and the sensitivity around illegal early release schemes.
To its credit the ATO released details as to how this would work a few days after the government made the announcement about being able to access superannuation benefits early.
This all happened between 22 and 25 March and further coronavirus ramifications have surfaced since with SMSF implications. Arguably the two most noticeable have been the encouragement for landlords to provide rental relief for tenants and the effect market fluctuations might be having on SMSF portfolios.
With regard to rental relief, there was a danger an SMSF could trigger a contravention of the law should it grant rental relief on an investment property, particularly if the tenant is a related party. Thankfully, the ATO has adopted a common-sense approach to its compliance activities to these situations, stating it will not take action against an SMSF grating rental relief in 2019/20 and 2020/21.
Similarly, the drop in share and property markets due to COVID-19 brings the danger of some SMSFs breaching the in-house asset rule whereby one of these assets could potentially now represent more than 5 per cent of the total assets in an SMSF portfolio.
Here the regulator outlined the steps an SMSF must take if it is in this situation, that is, formulate a written plan as to how it will rectify the situation. Further, the plan has to be formulated and executed by 30 June 2021 if an in-house asset breach of this nature occurs at 30 June 2020.
That’s probably to be expected, but the ATO again added an element that will ease the minds of SMSF trustees. It confirmed no compliance activity will take place if the plan was unable to be actioned by the set deadline or if the circumstances dictate implementation of the plan was unnecessary.
Another win for common sense.
As such, in my view the ATO’s actions in response to the coronavirus pandemic’s effects on the SMSF community have been very good and it deserves a gold star. The last thing trustees needed in these unique times was for the regulator to create more fear, uncertainty and panic and the ATO has successfully managed to avoid this outcome.