July 5, 2022

COVID-19 - changes affecting super

This continues our series on the financial impact of the COVID-19 threat. Today we cover some changes to superannuation recently announced by the government.

This continues our series on the financial impact of the COVID-19 threat. Today we cover some changes to superannuation recently announced by the government:

  • Reduction in minimum drawdown rates
  • Reduction in social security deeming rates
  • Early access to super

Temporary reduction in superannuation minimum drawdownThe 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 gives retirees more flexibility regarding how they manage their superannuation assets.AgeDefault minimum drawdown rates (%)Reduced rates by 50 per cent for the 2019/20 and 2020/21 income years (%)Under 654265 -7452.575 - 796380 - 8473.585 - 8994.590 - 94115.595 or more147Under these changes, individuals who have already taken their minimum pension amount for the 2019/20 financial year will not be able to put that money back into their superannuation account.Reduction in social security deeming ratesAs 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.Early release of superannuationWhile 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 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 (exact timing will depend on the passage of the relevant legislation).The exact eligibility requirements will be formed in the coming days, but broadly 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.Separate arrangements will apply if you are a member of an SMSF.You will be able to apply for early release of your superannuation from mid-April 2020.If you have any questions about the above (or any aspect of your financial situation), please contact us on 02 9739 6555.Note, the above does not constitute financial advice as it does not take into account your personal circumstances, timeframe or goals. Do not act on any information contained here, on our website or social media without first obtaining an opinion or guidance from your professional financial adviser.

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