Have you lost your job because of COVID-19? You may be able to access your super
The Federal Government has announced that individuals who have been affected by the coronavirus are able to access up to $10,000 of their superannuation in 2019-20, in order to make up for any lost income. Additionally, individuals are also able to access an additional $10,000 from their super in 2020-21.
Am I eligible for temporary early access to my super?
In order to be eligible for the early release of superannuation you need to satisfy one of 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.
Is there any tax payable on superannuation withdrawals?
If you need to access your superannuation under these provisions you will not need to pay tax on any amounts released.
Will any money I withdraw affect Centrelink payments?
Any money withdrawn from superannuation under these provisions will not affect Centrelink or Veteran’s Affairs payments.
What happens if I have a self-managed super fund?
Separate arrangements apply if you are a member of a self-managed superannuation fund. Further information will be made available on the ATO website www.ato.gov.au
How and when do I apply for early access?
HOW TO APPLY: If eligible, you can apply directly through the ATO at the myGov website at www.mygov.com.au. You will need to certify that you meet the criteria.
What happens next?
- After the ATO has processed your application they will issue you with a determination.
- The ATO will also provide a copy of this determination to your superannuation fund, advising them to release your payment
- Your fund will make the payment to you, and you do not need to contact them directly in order to apply
- However, to ensure you receive your payment as soon as possible you should contact your super fund to make sure they have your correct details
WHEN TO APPLY: You can apply for the early release of your superannuation from mid-April 2020.
Support for retirees, with the reduction of deeming rates and drawdown requirements
The Government has announced two new measures to help retirees manage the impact of volatility in financial markets on their retirement savings. They have temporarily reduced superannuation minimum drawdown requirements, while also lowering social security deeming rates in recognition of the impact of low interest rates on savings.
Temporary reduction in superannuation minimum drawdown requirements
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 income years.
This will help retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements.
EXAMPLE: Julie’s account-based pension at 1 July 2019 is $200,000.
Under current requirements, Julie is required to drawdown 5% of her account balance - $10,000 - over the course of the 2019-20 and 2020-21 income years.
Following the changes, Julie will now only be required to drawdown 2.5% of her account balance - $5,000 - by 30 June 2020.
On 1 July 2020 the value of Julie’s account-based pension is $180,000 (after drawdowns and investment losses). During 2020-21, Julie is required to drawdown 2.5% of her account balance, which is $4,500, instead of $9,000.
Changes to social security deeming rates
The Government is reducing both the upper and lower social security deeming rates by a further 0.25 percentage points in addition to the 0.5 percentage point reduction to both rates announced on 12 March 2020.
What are the new rates?
As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate will be 0.25%. These reductions reflect the low interest rate environment and its impact on income from savings.
When are they effective?
These changes will be effective from 1 May 2020.
EXAMPLE 1: Single part-rate age pensioner
Margaret receives a single part-rate age pension. She has $200,000 in financial assets with $175,000 held in a term deposit which returns 1.5% and the remainder in a cash transaction account earning a negligible rate of interest.
Under the former deeming rates, Helen’s pension would have been reduced by $8.50 per fortnight. With the change in deeming rates Helen has less deemed income and will now be eligible for a maximum rate age pension.
EXAMPLE 2: Age pension couple
Mark and Isabel are an age pensioner couple. They have $550,000 worth of financial assets and hold $300,000 in a superannuation account which returned 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, Mark and Isabel’s pension would have been reduced by $65 each per fortnight. Under the new rates, it will only be reduced by around $32 each per fortnight.
Not sure how all this will impact on your retirement? Talk to your accountant.
Superannuation can be complicated, and it can be hard to understand the long term impact of changes like the ones recently announced by the Government. If you’re an individual who is thinking about accessing their super early or a retiree who is trying to make sense of the new rules and how they apply, it’s a good time to talk to your accountant.