The coronavirus pandemic has caused a lot of physical and financial pain, with the federal government doing its best to aid Australians on both fronts.
Perhaps one of the most discussed and most significant economic relief measures Canberra has introduced to help people deal with COVID-19 is allowing individuals early access to a portion of their superannuation benefits – $10,000 this financial year and $10,000 next financial year.
Assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume has predicted anywhere between 1.6 million and 1.7 million people will take advantage of this instrument.
There are two sets of procedures individuals have to follow to gain early access to their superannuation – one for Australian Prudential Regulation Authority (APRA) funds and another for SMSFs.
All super fund members have to apply for the relief measure to the ATO through the MyGov platform. For APRA-regulated funds, if the application is approved, the ATO will communicate this to fund trustees who will then release the payment to the member.
Conversely for SMSFs, the ATO will contact the member directly with the determination and they will then have to pass this information on to the trustee. Given SMSF members are trustees, it makes this process a lot simpler.
Having to deal with an extra layer of administration can make people nervous about how quickly the process will take to complete and the speed with which they can receive the money to which they are entitled.
This is one element that has highlighted the key characteristics and power of SMSFs and why people set them up, that is, for greater control over their retirement savings. This has been pointed out time and time again, but detractors of the sector continue to make efficiency and effectiveness comparisons based purely on the costs involved compared to other superannuation vehicles.
When the virus has eventually effectively been dealt with, perhaps some research can be performed to establish more first-hand evidence to reinforce this point to allow the relevant authorities to better understand the sector.
One of the other issues that has surfaced from this relief measure is the liquidity levels of the public offer funds. Basically there have been concerns APRA-regulated funds will have to sell off assets at a low point in the markets to fund these COVID-19 payments.
Perhaps this too may dull one of the constant criticisms levelled at SMSFs over their asset allocations. SMSFs have long been derided for holding too much cash in their portfolios.
From a return perspective, holding excess amounts of cash is not necessarily the most efficient practice. However, I don’t think there would be one trustee in Australia, SMSF or otherwise, who would be complaining about holding more than enough cash to cover COVID-19 payments right now.
Again this may prompt a better analysis of SMSF members’ asset holdings, both inside and outside super, to properly assess whether their funds have an appropriately structured investment portfolio in a post-coronavirus world.
The pandemic has been a terrible thing for Australian society, and society worldwide, but perhaps one resulting positive can be a better and deeper understanding of the strengths of SMSFs and what motivates their trustees. With any luck this in turn can lead to improved interaction with the sector from government and its associated agencies.