Australian Government Changes to Superannuation in Response to the Coronavirus Pandemic
The Australian Government’s stimulus packages include two key changes to the existing Superannuation rules to help both retirees and individuals who find themselves in financial distress as a result of the Coronavirus Pandemic
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Temporary reduction in minimum superannuation draw down rates.
The current superannuation rules dictate a default minimum pension drawdown for those Australians who have converted their superannuation benefits into a Retirement Phase Income Stream (previously known as an Account Based Pension). These rates start at 4% of the opening account balance for those under 65 and increase based in the member’s age up to 14% for those over 95.
In light of the significant impact the Coronavirus has had on the global stock markets the Australian Government has announced the annual minimum pension rates will now be reduced by 50% for both the 2019-2020 and 2020-2021 financial years. The rates for the next two years will therefore be as follows:
| 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 |
These measures are designed to assist members to preserve the capital values of their superannuation benefits and prevent them from being forced to sell the underlying investments at significantly reduced values in order to meet their minimum pension requirements.
Some members may have already withdrawn pensions for the 2019-2020 financial year in excess of the amount calculated with the new minimum rates. Unfortunately, in these circumstances you are not permitted to return the excess amount to your Superannuation Fund.
What you need to do:
- We will be contacting all clients with Income Streams within their Self-Managed Superannuation Funds (SMSFs) to discuss the impact of this change with you and what needs to be done prior to 30th June 2020.
- For those clients who have an Income Stream from a public retail or industry fund you will need to speak with your Superannuation Fund or Financial Planner directly to discuss your options if you wish to reduce your payments for the remainder of this financial year or next financial year.
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Early release of superannuation
From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-2020, and a further $10,000 in 2020-2021. The withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.
To be eligible to access your superannuation you need to meet at least one 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% 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.
For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.
What you need to do:
- If you meet one of the above conditions and wish to access funds from your superannuation balance you should register for myGov, if you haven’t already, and submit your application once the facility opens in mid-April 2020.