COVID-19 – Economic Support Packages in Response to the Coronavirus Impact and the Superannuation Measures Introduced
To date, $189 billion has been injected into the economy in order to keep Australians in work and businesses in business, including the first $17.6 billion package, the RBA and Government’s $105 billion to the banks to deliver easier access to finance, and the latest $66.1 billion stimulus package.
The government will also reduce the minimum pension drawdown requirements for account-based pensions and similar products by 50 per cent for the 2019–20 and 2020–21 financial years. This measure reduces the need for retirees to sell investment assets to fund minimum drawdown requirements.
Deeming rates for pensioners will also be reduced by another 0.25 of a percentage point.
Eligible individuals, including employees who have been made redundant or whose working hours have been reduced by >20%, those unemployed, and sole traders whose businesses have been suspended or seen a reduction in turnover by >20%, will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020, and a further $10,000 from 1 July 2020 for approximately three months.
These important superannuation measures are explained in more detail below.
Temporary reductions in superannuation minimum drawdown rates
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for the 2019-20 and 2020-21 financial years. 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 be able to put that money back into their superannuation account under these changes.
Reducing social security deeming rates
As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate will be 0.25%. The reductions reflect the low interest rate environment and its impact on the income from savings.
The change will benefit around 900,000 income support recipients, including around 565,000 people on the Age Pension who will, on average, receive around $105 more from the Age Pension in the first full year that the reduced rates apply.
The changes will be effective from 1 May 2020.
For example
Leslie and Brian are an age pensioner couple. They have $550,000 worth of financial assets. They hold $300,000 in a superannuation account with a conservative investment strategy which returned around 5% last year. They have invested $130,000 in a term deposit with an annual return of 1.5% and hold the remainder in a cash transaction account earning a negligible rate of interest.
Under the former deeming rates, Leslie and Brian’s Age Pension would have been reduced by $65 each per fortnight. Under the new deeming rates, Leslie and Brian’s Age Pension will only be reduced by around $32 each per fortnight.
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 for this new ground of early release, you can apply directly to the ATO through the myGov website.
Separate arrangements will apply for members of a SMSF.
You will be able to apply for early release of your superannuation from mid-April 2020.
How can we help?
We will provide further updates that affect the superannuation industry as they become available. As our business operates online and our staff and auditors are working remotely within Australia, we do not foresee any major disruption to our service to you during this time, but will keep you informed if delays are expected.
Take care of yourselves, your families and each other.
