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COVID-19 – The Government’s Superannuation Changes Explained

01/04/2020 by Pascoe Partners Accountants

COVID-19 – The Government’s Superannuation Changes Explained

Over the past two weeks the Government has announced two economic stimulus packages to cushion the economic impact of the Coronavirus.

There are some important superannuation measures that you should be aware of:

Accessing your super early

You will be able to apply online through the myGov website (https://my.gov.au/) to access up to $10,000 of your superannuation before 1 July 2020.

You can access a further $10,000 of your super from 1 July 2020 until 24 September 2020.

You will only be able to make one request for each financial year. For example, should you nominate for a lesser withdrawal amount in 2019/20, you will not be able to apply again before 1 July 2020 for the remainder nor will you be able to apply for more than $10,000 from 1 July 2020.

If you access your superannuation you will not be required to pay tax on amounts released and any amounts withdrawn will not affect your Centrelink or Veterans’ Affairs payments. These amounts will also not be included in your assessable income for the financial year the withdrawal is made.

Satisfying early release requirements

The intention of the legislation is that you are adversely affected by the economic impacts of COVID-19 and require early access to your superannuation which is ordinarily preserved until your retirement.

To apply for early release of your superannuation, you must satisfy one or more of the following requirements:

  • You are unemployed.
  • 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.
  • On or after 1 January 2020, any of the following happened:
    • You were made redundant.
    • Your working hours were reduced by 20% or more.
    • You were a sole trader and your business was suspended or your turnover decreased by 20% or more.

These are the only requirements that must be considered.

How to apply to access your superannuation

From today, those affected can register their interest to access through the myGov website (https://my.gov.au/).

If you satisfy one or more of the requirements entitling you to access your superannuation early, you will be able to do so from mid-April.

After applying through myGov, the ATO will issue you with a determination advising of your eligibility to release an amount. Only once your SMSF receives the determination from you, will the trustee be authorised to make the payment. If you apply to access superannuation benefits from a non SMSF, the determination will be issued by the ATO direct to the APRA regulated funds and the trustee will proceed to release your benefits to a nominated bank account.

I would recommend getting in touch with me to discuss your specific circumstances in more detail to ensure you aren’t breaching any regulations.

 

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.

The changes will be effective from 1 May 2020.

 

Temporarily reduce superannuation minimum drawdown rates

The 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 will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.

Reducing related property rents

Many SMSF’s rent the property they own to their business.  Concerns have been raised, due to the impact of COVID-19, that these businesses can no longer afford to pay their rent. Charging a business  rent at a price that is less than market value usually results in a contravention.

The ATO has announced they will be taking no action in situations where an SMSF, which owns a business premise that is being leased to a related party, reduces the rent for the 2019/20 and 2020/21 financial years.

How can we help?

If you need assistance with the early access of your superannuation or whether this is the right action for you and your specific circumstances, please feel free to give us a call so that we can discuss in more detail.