In recent weeks the Government has made several announcements in relation to superannuation in response to the COVID-19 impact on Australians.
Temporary early access to super
While superannuation helps people save for retirement, the Government recognises that for those significantly financially affected by COVID-19, accessing some of their superannuation today may outweigh the benefits of maintaining those savings until retirement.
Eligible individuals will be able to access up to $10,000 from their superannuation before 1 July 2020. A further amount of up to $10,000 will be available from 1 July 2020 but only for approximately three months after that time. Only one payment will be permitted in each financial year.
To apply for early release, individuals must satisfy any one or more of the following requirements:
- they are unemployed; or
- they 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:
- they were made redundant; or
- their working hours were reduced by 20 per cent or more; or
- if they are a sole trader — their business was suspended or there was a reduction in their 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 individuals are eligible for this new ground of early release, they can apply directly to the ATO through the myGov website.
People will be able to apply for early release of their superannuation from mid-April 2020.
Pension Minimums Halved
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 (%)|
|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 their superannuation account under these changes.
Rent Relief for SMSFs
The ATO is allowing rent relief for related party arrangements.
An SMSF may give a tenant – who is also a related party – a temporary rent reduction during the 2019/20 and 2020/21 financial years.
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.
Action items for Trustees
It may be prudent for SMSF Trustees to consider a pension stop/restart and this is something many will need advice on.
It’s also a great time to ensure estate planning is up to date and reviewing death benefit nominations to ensure they are still current and valid. Finally, if clients don’t have an Enduring Power of Attorney, it’s prudent to get one.