Over the past two weeks the Government has announced two economic stimulus packages to cushion the economic impact of the Coronavirus.

A total of $189 billion is being injected into the economy by all arms of Government in order to keep Australians in work and businesses in business.

This includes $17.6 billion for the Government’s first economic stimulus package, $90 billion from the RBA and $15 billion from the Government to deliver easier access to finance, and $66.1 billion in yesterday’s economic support package.

There are some important superannuation measures that you should be aware of:

Temporarily reduce superannuation minimum pension 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.

Age Default minimum drawdown rates (%) Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%)
Under 65 4 2
65-74 5 2.5
75-79 6 3
80-84 7 3.5
85-89 9 4.5
90-94 11 5.5
95 or more 14 7

 

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.

All Pension providers are racing to see how this will work in reality.  As we have further information, we will be in contact.  

If you need assistance with this – please let us know. 

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 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 per cent last year. They have invested $130,000 in a term deposit with an annual return of 1.5 per cent 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.

If you have not previously qualified for the Commonwealth Seniors Health Care (CSHC) Card or Age Pension, you may want to review your eligibility based on the market value of assets having decreased as well as the deemed income reducing.  Please call us and we can calculate whether you can now qualify.  It is more important than ever to try and qualify for the CSHC Card given that some one-off Stimulus payments apply to Card holders, even if you are not receiving other benefits.

Click here for Fact Sheet

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.

From mid-April 2020 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.

If you access your superannuation you will not need to pay tax on amounts released and the money withdrawn will not affect other Centrelink or Veteran’ Affairs payments.

Eligibility requirements to access early release of super:

  • You are unemployed; or
  • Eligible for 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 01 January 2020:
    • You were made redundant; or
    • Your working hours were reduced by 20% or more; or
    • If you are a sole trader – your business was suspended or there was a reduction in your turnover of 20% or more.
  • After the ATO has processed the application, they will issue a determination. A copy of this determination will be provided by the ATO to your super fund, and at that point you will be able to access the funds.

At this stage, we have no guidance on the information that will be required by the ATO to substantiate a reduction in working hours or turnover or the suspension of a business (for example, will this only apply if suspension is forced by the government).

If you satisfy the criteria, you will first need to apply to the ATO to be approved to access your superannuation early (you cannot self-assess). This can be done online through myGov.

It appears that you will be able to apply for the first tranche of relief (for the 2020 financial year) from mid-April 2020. Applications for early access in the 2021 financial year will need to be made between 1 July 2020 and 24 September 2020 (estimated date only).

Individuals will be restricted to making one application in each financial year. This means if a request is made for less than $10,000 in either financial year then a further application to release the balance up to the maximum $10,000 threshold cannot be made.

Once approved by the ATO, you will be able to withdraw the approved amount from superannuation. The ATO will send a copy of any determination to the applicant and the trustees of the fund. It will be important for the trustees to retain a copy of the determination to avoid compliance issues later. No tax will be payable on the amounts accessed early (provided you have been approved before withdrawing the money).

If you are eligible for this new round of early release, you can apply directly to the ATO through the myGov website

Separate arrangements will apply if you are a member of an SMSF and we do not yet know what these are.  As soon as we know the actual arrangements you need to undertake we will let you know.

You will be able to apply for early release of your superannuation from mid-April 2020.

Click here to access the fact sheet

One-off payments

The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. Around half of those that benefit are pensioners The first payment (announced on 12 March 2020) will be available to people who are eligible payment recipients and concession card holders at any time from 12 March 2020 to 13 April 2020 inclusive. The second payment will be available to people who are eligible payment recipients and concession card holders on 10 July 2020.

Click here for fact sheet

Coronavirus Supplement

The Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients of the eligible payment categories. The Coronavirus Supplement and expanded access for payments will commence from 27 April 2020.

Click here for the fact sheet.

How can we help?

If you need assistance with understanding any of these recent announcements, please feel free to give your trusted Ulton Wealth Manager a call to discuss your particular requirements in more detail. 

 

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