Early release should be in cash

early release in-specie

SMSFs should not be looking to make any COVID-19 early super release payments in the form of an in-specie transfer if the fund is suffering from liquidity issues, an industry specialist has said.

In-specie transfers are unlikely to be a suitable method to pay out an application for the early release of super under the COVID-19 financial hardship measures due to the nature of the instrument, a sector specialist has said.

“I would ask the question back to the trustees [wanting to use an in-specie transfer for early release purposes:] ‘Are you actually in financial hardship if [making the payment in the form of] shares is satisfying that liability of up to $10,000?’” SuperGuardian education manager Tim Miller said during his organisation’s latest technical webinar today.

“That’s because you’re still going to have the need, potentially, to liquidate the shares to be able to actually meet your ongoing living expenses and things.

“So I think from an in-specie point of view while there is nothing that states early release must be a cash payment, when discussing it with others, I have said for all intents and purposes it should be a cash payment.”

According to Miller, trustees have been exploring whether in-specie transfers can be used for this purpose as a possible solution in the event an SMSF does not have sufficient liquidity on hand to make a cash payment.

He also shed some light on when early super release payments needed to be made once the SMSF trustees had received a member application for this economic relief measure.

“The APRA (Australian Prudential Regulation Authority) got guidance about the immediacy of which they needed to pay [early release applications] and there was like a four-day turnaround that was placed on them,” he said.

“So I think in this sort of situation it’s important for the trustees of a self-managed super fund to follow those same sort of principles because themselves as members are applying for this money because they actually need it.

“So the super fund needs to have that money paid out as quickly as possible.”

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