The federal government recently announced big changes to superannuation as part of its economic stimulus efforts. But what are they … and what to the really mean? Find out below how government changes might affect you and your superannuation.
MEASURE 1 – EARLY RELEASE OF SUPERANNUATION
If you are suffering financial stress due to Covid-19, you may be eligible for an early release of some of your superannuation.
The government is now allowing the withdrawal of:
- up to $10,000 of their superannuation in 2019–20 financial year; and
- up to a further $10,000 in the financial year ending 30 June 2021.
Applications must be made through the myGov before 1 July 2020 for the release of funds for this financial year. Funds in the 2020-2021 financial year can be made on or after 1 July 2020 for a three month window.
So who is eligible?
If you meet any of the following criteria, you may be eligible for the early release of superannuation:
- They must be unemployed; OR
- They must be eligible to receive a jobseeker 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.
If eligible, there will be no tax payable on released funds and released monies will not impact Centrelink or Veterans’ Affairs payments.
If you are considering applying for early release of your superannuation, we expect to see applications open from mid-April 2020 onwards.
It is important to understand that the ATO will determine who is eligible and only once a determination from the ATO is received by a fund will the fund be able to pay the early release money.
In addition, the ATO will be expected to provide more information about how this applies to SMSFs.
MEASURE 2 – TEMPORARY REDUCTION IN MINIMUM DRAWDOWN RATES
The minimum drawdown requirements for account based pensions have also been reduced by half for this financial year and next.
It is important to understand that the relief doesn’t reduce the maximum allowable under a transition to retirement income stream. It is simply a way to help preserve capital in circumstances where investment markets have plummeted.
MEASURE 3 – REDUCTION IN SOCIAL SECURITY DEEMING RATES
The government deeming rates have reduced by a further 0.25% following rate reductions by the Reserve Bank of Australia.
From 1 May 2020, the lower deeming rate will be 0.25 of a percentage point and the upper deeming rate will be 2.25 per cent. The rates are as follows:
Singles – Investment value and deeming rate
- Up to $51,800 – 0.25%
- Over $51,800 – 2.25%
Couples – Investment value and deeming rate
- Up to $86,200 – 0.25%
- Over $86,200 – 2.25%
NEED FURTHER INFORMATION?
If you would like any further information, please contact Rebecca Edwards, Senior Associate & SMSF Specialist AdvisorTM at CRH Law.