There is so much going on at the moment and many changes to the laws and norms under which we operate.
If you have an SMSF and this is highly regulated area I have some guidance from our auditors that may assist you in your decision making.
This information contains broad examples to guide you, you must discuss your particular issue with your adviser and receive specific advice regarding your circumstances and question.

Here is the guidance provided:

Temporarily reducing superannuation minimum payment amounts (see below for more detail)
Question: I am retired and receive an account-based pension from my SMSF. My account-based pension balance has been badly affected by the losses in the financial market because of the COVID-19 crisis. I would like to reduce my pension payments. Does the SMSF still need to pay me the minimum amount that was calculated based on my account balance at 1 July 2019?
Answer: Certain superannuation pensions and annuities are subject to rules about minimum and maximum amounts paid in a financial year. To assist retirees, the government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% in the 2019–20 and the 2020–21 financial years.
See also:

 


Temporarily reducing rent
Question: My SMSF owns real property and wants to give my tenant – who is a related party – a reduction in rent because of the financial impacts of the COVID-19. Charging a related party a price that is less than market value is usually a contravention. Given the impacts of the COVID-19, will the ATO take action if I do this?
Answer: Some landlords are giving their tenants a reduction in or waiver of rent because of the financial impacts of the COVID-19 and we understand that you may wish to do so as well. Our compliance approach for the 2019–20 and 2020–21 financial years is that we will not take action where an SMSF gives a tenant – who is also a related party – a temporary rent reduction during this period.
See also:

 


In-house asset restrictions
Question: The downturn in the share market may result in the fund’s in-house assets being more than 5% of the fund’s total assets. The in-house asset rules would be breached. What do I need to do?
Answer: If, at the end of a financial year, the level of in-house assets of a SMSF exceeds 5% of a fund’s total assets, the trustees must prepare a written plan to reduce the market ratio of in-house assets to 5% or below. This plan must be prepared before the end of the next following year of income. If an SMSF exceeds the 5% in-house asset threshold as at 30 June 2020, a plan must be prepared and implemented on or before 30 June 2021.
However, we will not undertake compliance activity if the rectification plan was unable to be executed because the market has not recovered or it was unnecessary to implement the plan as the market had recovered.
See also:

 


Super balance losses
Question: My super balance has been affected by downturns in the global economy. Can I claim this loss?
Answer: We understand that downturns in the global economy may impact on your super balance. Realised losses arising in a super fund may be available to the fund to deduct against realised gains in future years, however these losses are not available to you to deduct in your own personal tax return. As you don’t return any profit made in your super fund as assessable income in your personal tax return, similarly you can’t claim a deduction for the loss in your super balance.
However if you made personal super contributions during the financial year to a complying super fund, you may be able to claim a deduction for those contributions.
See also:

 

Investment strategies
Question: The downturn in the market has impacted on my SMSF’s investment strategy. What do I need to do?
Answer: Trustees must prepare and implement an investment strategy for their SMSF, which they must then give effect to and review regularly. The strategy should be reviewed at least annually, and you should document that you’ve undertaken this review any decisions arising from the review. Certain significant events, such as a market correction, should also prompt a review of your strategy and may require updating your investment strategy.
Where the assets of an SMSF or the level of investment in those assets fall outside of the scope of your investment strategy, you should take action to address that situation, which could involve adjustments to investments or updating your investment strategy. We don’t consider that short term variations to your articulated investment approach, including to specified asset allocations whilst you adjust your investments, constitute a variation from your investment strategy.
All investment decisions must be made in accordance with the investment strategy of the fund. If in doubt, trustees should seek investment advice.

COVID-19 – Providing rental relief for the tenant in my SMSF property 
The economic impacts of the COVID-19 crisis are causing significant financial distress for many businesses and individuals
If your SMSF has a property and a tenant in financial distress, you may be able to provide your tenant with rental relief under an agreed commercial arrangement. This may even be the case when the tenant is a related party or yourself.
Ordinarily, charging a tenant a price that is less than market value in an SMSF is usually a breach of superannuation laws. However, the ATO have provided guidance which allows SMSF landlords to provide for a reduction in or waiver of rent because of the financial impacts of the COVID-19.
For the 2019–20 and 2020–21 financial years, the ATO will not take action where an SMSF gives a tenant – who may also be a related party – a temporary rent reduction during this period.

What do you need to do?
There are some important things you should ensure are in place when you are providing a rent reduction to a tenant, especially when this is a related party.

 

  • Ensure the relief only applies to rent.
    • Any relief offered to a tenant can only relate to the rent component of the lease agreement. The ATO concession does not extend to other lease incentives
  • Ensure that the reduction in rent is only temporary
    • This means it should have an agreed period of time or agreed date where the rent is reviewed in light of the economic circumstances
  • The financial difficulty faced by the tenant is linked to the financial impacts of COVID-19
    • Any negotiated rent relief will need to be measured against the COVID-19 financial impact suffered by your tenant
  • Clear arrangements which detail the amount of discount, waiver or deferral of the rent
    • In evidencing that the rent relief is reasonable, it would be best practice if it is consistent with an approach taken by an arm’s length landlord
  • Ensure you have proper documentation which allows your independent auditor to be satisfied that the temporary rent relief satisfies all of the above
    • This may take the form of a signed minute, renewed lease agreement or anything deemed appropriate to amend the terms of the lease temporarily
    • Even if you are both the tenant and landlord, the above should all be documented

These are extraordinary times and the ATO is providing this guidance to allow SMSF trustees to be flexible and agile.
If trustees act in good faith in implementing a reasonable and measured reduction in rent because of the impacts of COVID-19 they should not fall foul of the law.

Temporarily reduce superannuation minimum drawdown rates
The Government is temporarily reducing superannuation minimum drawdown requirements for account based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.

 

Individuals who have already taken their minimum pension amount for the 2019/20 financial year will not able to put that money back into his superannuation account under these changes.

Reducing social security deeming rates
As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings.
The changes will be effective from 1 May 2020.

Early release of superannuation
While superannuation helps people save for retirement, the Government recognises that for those significantly financially affected by the Coronavirus, accessing some of their superannuation today may outweigh the benefits of maintaining those savings until retirement.
Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020.
They will also be able to access up to a further $10,000 from 1 July 2020 for approximately three months (exact timing will depend on the passage of the relevant legislation).
The exact eligibility requirements will be formed in the coming days but broadly to apply for early release you must satisfy any one or more of the following requirements:

 

  • you are unemployed; or
  • you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
  • on or after 1 January 2020:
    • you were made redundant; or
    • your working hours were reduced by 20 per cent or more; or
    • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.

People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
If you are eligible and NOT a SMSF member you can apply directly to the ATO through the myGov website: https://my.gov.au/.
Separate arrangements will apply if you are a member of an SMSF.
You will be able to apply for early release of your superannuation from mid-April 2020.

Regards
Adrian, Aquila and the VJC team

 

 

General Advice warning: the information in this article is general in nature, it is not advice specific to your needs. If you want to act upon the information in this article then you should seek advice from a qualified professional. VJC WM accepts no liability to any party for acting from this information unless they have sought advice in a formal engagement with VJC WM for this purpose.