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 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.

If the amount you have drawn this year to date already meets the reduced minimum pension amount you can cease drawing your pension immediately.  You will then need to re-start the pension payments from the Super Fund’s bank account from 01 July 2020 at the reduced rate.

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

If you are dealing with this yourself, please:

  • email super@ulton.net advising of the fact that you have chosen to use the new reduced minimum pension amount;
  • Use “Pension Minimum reduced” as the Subject or the email.
  • This will assist in managing pension minutes in future.

Click here for 'Managing Market Volatility' Fact Sheet

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 'Support for Retirees to Manage Market Volatility' 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.

Importantly for SMSFs - you can’t just take the money out of the Super Fund bank account (or you will potentially cause a compliance breach in  your Super Fund).  You will still have to go through a process and may still need to get an ATO determination via myGov first.  As soon as we know the special process in relation to SMSFs for early access, we will let you know.

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 read the 'Early Access to Super' Fact Sheet

SMSF Association Lobbying

The SMSF Association of Australia (of which we are members) are currently lobbying Government in relation to the following issues for SMSFS Trustees:

  • Delay for SMSF lodgements;
  • Rental concession being a commercial arrangement. This is a huge issue for our SMSF Trustees as many SMSFS with a commercial property rent to a related party tenant, and to comply you must deal with each other on arm’s length basis.  As soon as we have an outcome on this issue we will let you know.  In the meantime, if at all possible you should continue to pay the rent to the SMSF.  If this is not possible, please contact us immediately.
  • In House Asset relief;
  • Transfer Balance Cap relief due to the large economic shock. The $1.6m Transfer Balance Cap impacts a number of super measures – amount in pension, amount allowed to contribute etc. The SMSF Association is lobbying Government to have this amount amended due to current conditions.

If there are other SMSF issues you are facing, please let us know.  We are able to request the SMSF Association lobby on behalf of our Trustees.

How can we help?

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

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