As all of you will already be aware, the government has (so far) announced two large stimulus packages for the economy in response to the expected job losses and business strain from managing the COVID-19 crisis.
What does this mean for superannuation, and for SMSFs?
Two particular announcements are relevant for super, as follows:
1.Reduction of the minimum pension requirement for the next two financial years
The annual minimum pension withdrawal requirement for the 2020 and 2021 financial years will be halved. This means that if you’re generally required to pay 5% for example, you’ll only need to pay 2.5% to 30 June 2020. See below for a full table of the new minimum requirements. This is similar to the measures enacted after the GFC and will be very helpful for self-funded retirees in light of the recent decline in the stock market.
|Age||Default Minimum Pension Drawdown||Reduced rates at 50% for 19-20 and 20-21 financial years|
|95 or more||14%||7%|
Unfortunately, if you’ve already withdrawn your minimum requirement for the year, there is no mechanism to return surplus pension withdrawals.
2. Tax free early access to your super of up to $10k for the next two financial years
This is a new and significant change, and the one that I’ve received the most queries about.
From mid-April 2020 you’ll be able to apply for early access release from your super, of up to $10k for the 2019-2020 financial year, and another $10k for the 2020-2021 financial year.
In order to be eligible, you must meet any one or more of the following criteria:
- You are unemployed
- You are eligible to receive a job seeker payment, youth allowance for job seekers, parenting payment (including both single and partnered payments), special benefit or farm household allowance.
- On or after 1 January 2020, either
- You were made redundant,
- Your working hours were reduced by 20% or more
- If you are a sole trader, your business was suspended or there was a reduction of your turnover of 20% or more.
If you are eligible for this new style of early release, you can apply directly via the Australian Tax Office through the myGov website. You will need to certify that you meet the eligibility criteria.
Please also note that there will be special provisions for those releasing from self-managed super funds, however there are no further details on this at this stage. I expect the ATO to release more information as it becomes available.
If you would like further detail and examples of how this will operate, click through to the ATO Business website here.
There are additional measures available not related to superannuation as well, additional payments available particularly for those eligible for job seeker and other Centrelink payments, and small to medium sized businesses who will struggle in the coming months. A reduction in the social security income deeming rates has also been announced. There are also likely to be further announcements in the coming days, so watch this space.
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