The end of any financial year is a busy time. For this financial year, the impact of COVID-19 on investment markets generally and the economy more broadly means trustees need to be even more thorough in their analysis and evaluation of their SMSF and retirement plans.
We have outlined below some areas that we believe trustees should consider before the year end, to take advantage of the federal government’s relief packages designed to assist individuals in these difficult financial times.
For members of an SMSF who have been adversely affected by COVID-19 and can’t access their superannuation, the opportunity to withdraw as much as $10,000 under the adjusted financial hardship rules may be available for the financial years ending June 30 2020 and 2021.
SMSF members must submit their application through MyGov between now and June 30 to secure this opportunity this financial year. A second application for an additional $10,000 can be made from July 1 to September 24 for financial 2021. If you need assistance please contact McFillin & Partners.
Please note that SMSF Trustees must ensure that their trust deed allows the new temporary release condition and that they properly document the release and which eligibility criteria the member has satisfied. It is also important trustees have the required liquidity and do not pay any superannuation benefits before receiving the ATO determination. If you would like McFillin & Partners to review your Trust Deed please contact us as soon as possible.
The federal government has provided that, for financial years 2020 and 2021, the minimum pension requirements will be halved.
This is to allow members adversely affected by market volatility to withdraw less pension from their account for these two years, minimising the need to sell assets at reduced prices to meet these payments that must be paid in cash.
Regardless of the decision as to the level of drawdown by pension members, trustees must still ensure those members with an ongoing pension paid from their fund, or who started one during the year, must have drawn out at least the adjusted minimum legally required payment for the financial year.
McFillin & Partners recommend that for the 2020 year end, SMSF Trustees obtain an independent valuation on the properties held within their superannuation fund due to the volatility of the market in these uncertain times. This will improve the overall position of the fund moving into the next financial year.
Trustees should not forget to check the actual investments they have made are accurately reflected in their SMSF’s investment strategy. Often large movements in markets, such as those because of COVID-19, can cause the total value of particular assets to be outside the limitations set for those asset classes in the investment strategy.
Given the recent and possible future impact of COVID-19 on all markets, the investment objectives of the SMSF, and the investment strategy implemented to achieve those objectives, may need to be re-evaluated by trustees.
Are the long-term investment objectives for members’ retirement goals still realistic? Are the investments made to achieve those objectives likely to deliver? To do this, trustees need to ask themselves how has the mix of asset types in their SMSF changed over the year?
Adjusting the asset mix to suit members’ new risk appetite is an ongoing responsibility of SMSF trustees. Trustees should also remember that while the sale and purchase of assets may best be undertaken before the year’s end, there may be tax outcomes for the fund.
Realising capital losses in order to offset realised capital gains while restructuring an SMSF’s portfolio alignment may be an important part of the process.
If you would like to discuss any of the above in more detail, please do not hesitate to contact McFillin & Partners.