The COVID-19 outbreak is having a huge impact as it continues to sweep across the nation.
The Government have announced a number of measures that will provide support for the large number of Australian’s affected by these unprecedented times.
Summary of all key announcements
Temporary reduction in superannuation minimum drawdown requirements
This measure will benefit retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements. This reduction applies for the 2019-20 and 2020-21 income years.
This measure will have no impact on the underlying cash balance for the 2019-20 and a negligible impact in 2020-21.
Temporary Early Access to Superannuation
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. This measure is expected to have a cost of $876 million over the forward estimates.
Eligible individuals will be able to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to $10,000 from 1 July 2020 for approximately three months (exact timing will depend on passage of relevant legislation). Individuals 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.
To be eligible, the applicant individual has to satisfy any one or more of the following requirements:
- is unemployed; or
- 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:
- has been made redundant; or
- the working hours were reduced by 20% or more; or
- if the applicant is a sole trader, the business was suspended or there was a reduction in your turnover of 20% or more.
How to apply
Separate arrangements apply to self-managed super funds, to be determined by the ATO. The ATO has not yet published details of this process.
The following procedures apply to regulated super funds other than SMSFs. Application has to be made directly to the ATO through the myGov website: www.my.gov.au . The applicant has to certify that they meet the eligibility criteria.
The ATO will process the application and make a determination.
The ATO will also provide a copy of this determination to the super fund which will release the benefits to the applicant member. It is not necessary to apply directly to the super fund.
Meanwhile, the applicant can contact their super fund to ensure their member records including current account details are correct and proof of identity document in place, to facilitate payment to be made as soon as possible.
Resisting the urge to sell down
Selling down to cash in a market downturn and remaining in Cash (either permanently or even for 12 months), while waiting for volatility to pass can result in significantly lower ending wealth.
As shown in the graph below, which looks at market responses and market performance for the decade following the Global Financial Crisis (GFC), remaining true to your investments strategy through times of uncertainty will help you achieve the best long term outcome.
Strategem continue to provide support
Our Accountants and Advisors are staying up to date with the relevant announcements and are continuing to work from home so we remain available to provide you with the support you need. If you have any questions please contact our staff on (03) 5445 4777.
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