Avoid SISR traps in early access to super scheme
A law firm has warned trustees to consider several factors to ensure they’re complying with the Superannuation Industry (Supervision) Regulations 1994 (SISR) before deciding to access the government’s early access to super scheme.
NB: Beware also scams surrounding the early release of super funds, they are on the increase.
The temporary early access to super (TEAS) scheme was one of several major changes to superannuation in the government’s second stimulus package in response to the economic effects of the COVID-19 outbreak.
The maximum amount that a member can access is $20,000 in the following increments, noting that a separate application is to be made on each occasion:
- Up to $10,000 in the financial year ending 30 June 2020
- Up to $10,000 in the financial year ending 30 June 2021
But according to Daniel Butler and Allison Murphy of DBA Lawyers, trustees should consider a range of other factors before accessing the scheme, including:
- Whether the SMSF deed requires updating to enable a TEAS withdrawal, given this is a new condition of release that many SMSF deeds may not authorise.
- The financial impact that any TEAS withdrawal will have on the member’s overall superannuation retirement nest egg over the long term.
- Ensuring the fund has sufficient cash flow to fund any TEAS withdrawal together with its ongoing operations in view of any financial stress on the fund resulting from the coronavirus.
- Preparing relevant trustee resolutions and updating the fund’s records.
As for members currently being paid an account-based pension or a transition to retirement income (TRIS) in retirement phase, Mr Butler and Ms Murphy said the amount required to fund the TEAS payment should first be commuted to accumulation before being paid to the member as a TEAS amount.
However, if a member is being paid a TRIS that is not in retirement phase, they said the amount should also first be commuted to accumulation before being paid as a TEAS amount, noting that a TRIS amount generally cannot be commuted, but new reg 6.19B of SISR authorises a payment of preserved money (after a TRIS is commuted).
“If the payment is not appropriately managed, a contravention of [SISR] could occur, resulting in potential penalties and the amount forming part of the member’s assessable income rather than being tax-free,” Mr Butler and Ms Murphy said.
“You should ensure the SMSF deed authorises this payment and prepare appropriate trustee resolutions.”
Adrian Flores
02 April 2020
smsfadviser.com
Latest Newsletters
Hot Issues
- Aged care report goes to the heart of Australia’s tax debate
- Removed super no longer protected from creditors: court
- ATO investigating 16.5k SMSFs over valuation compliance
- The 2025 Financial Year Tax & Super Changes You Need to Know!
- Investment and economic outlook, March 2024
- The compounding benefits from reinvesting dividends
- Three things to consider when switching your super
- Oldest Buildings in the World.
- Illegal access nets $637 million
- Trustee decisions are at their own discretion: expert
- Regular reviews and safekeeping of documents vital: expert
- Latest stats back up research into SMSF longevity and returns: educator
- Investment and economic outlook, February 2024
- Planning financially for a career break
- Could your SMSF do with more diversification?
- Countries producing the most solar power by gigawatt hours
- Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
- Quarterly reporting regime means communication now paramount: expert
- Plan now to take advantage of 5-year carry forward rule: expert
- Why investors are firmly focused on interest rates
- Super literacy low for cash-strapped
- Four timeless principles for investing success
- Investment and economic outlook, January 2024
- Wheat Production by Country
- Time to start planning for stage 3 tax cuts: technical manager
- Millions of Australians lose by leaving savings in default MySuper funds
- Vanguard economic and market outlook for 2024: A return to sound money
- An investment year of ups and downs
- How to tame the market's skewness
- The Countries that Export the Most Wine in the World
- Tips for preparing for the best tax outcomes
- Working after pension age
Article archive
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
April - June 2020 archive
- ‘HomeBuilder’ grants now available.
- Related-party property development concerns — Part 1
- The value of financial advice
- A super catch-up plan
- Court decides on taxable capital gains distributions
- SMSF liquidity lessons learnt from the pandemic
- Do your investment goals stack up?
- Retirement income framework deferred due to COVID-19
- How early super withdrawals add up
- AFP teams up with ATO, Treasury in COVID-19 tax fraud taskforce
- ATO extends initial JobKeeper payment deadline
- ATO releases JobKeeper alternative test
- Our Website, your resources
- Consumer satisfaction up for SMSFs, down for industry funds
- Superannuation for younger investors
- How to stay the course in retirement
- COVID-19: Early Childhood Education and Care Relief Package
- Government announces mandatory code for rent relief
- ATO clarifies COVID-19 rent relief concerns
- SMSFs in the ATO firing line
- Avoid SISR traps in early access to super scheme
- Data so large it's hard to comprehend.
- Ride the market to recovery
- Historic $130bn wage subsidy to cover 6 million workers
- Stage 2 – Covid-19 stimulus package.