In recent weeks the Government has made a number of announcements in relation to superannuation in response to the COVID-19 impact on Australians.
Temporary early access to your 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 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: https://my.gov.au/
You will be able to apply for early release of your superannuation from mid-April 2020.
Pension Minimums Halved
The Government is temporarily reducing superannuation minimum draw-down 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.
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. If this impacts you please call us.
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 we recommend you seek advice in this regard.
We also recommend your estate planning is up to date. It’s time to review your death benefit nominations to ensure they are still current and valid. Finally, if you don’t have an Enduring Power of Attorney, it’s time to get one.
How can we help?
If you have any further questions in relation to super please call our Superannuation Expert Karen Dezdjek at our office on (02) 9908 4744.