The Federal Government has recently announced a number of initiatives that are focused on ‘cushioning the economic impact of the coronavirus’. Here is a quick summary of the initiatives that may impact you or a family member.
Super drawdowns halved
The requirement to drawdown funds from an account based pension is being halved during this financial year and next. The rates will still vary with age, however will be 50% of the normal minimum drawdown.
For example, the drawdown rate for those aged 65 to 74 is normally 5% and this will now be 2.5%. For an investor with (say) $1,000,000 in pension, the minimum will now be $25,000 instead of $50,000.
If you have already taken out more than the new minimum amount for this financial year, you won’t be allowed to put it back into your pension account, however it does mean that you may choose to not take any pension payments for the remainder of the financial year.
Deeming rates reduced
From 1 May, the deeming rates that are used to assess investment income in relation to eligibility for the aged pension will be cut by 0.75%. The further reduction of 0.25% announced on Sunday follows a reduction of 0.5% announced on 12 March.
This will mean an increase in aged pension entitlement for those who are eligible and have their payment reduced due to assessment under the incomes test.
Increased Centrelink payments
For the next six months, the government is temporarily expanding eligibility to income support payments such as job seeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance. In addition, a new ‘coronavirus supplement’ of $550 per fortnight will be available to both existing and new recipients of these payments.
During this period, there will also be:
- Expanded access to payments for employees stood down from permanent, casual or contract positions plus sole traders whose businesses are impacted by reduced turnover;
- Waiving of the assets test for job seeker payment, although the income test will still apply;
- Waiving of the normal waiting periods and ‘liquid assets test’ before benefit payments commence; and
- Accelerated claim processing and the ability to apply and identify on line.
Those receiving income support payments will also receive a one-off payment of $750 (announced on 12 March). A second $750 payment was announced on Sunday (payable in July) for all income recipients that do not receive the coronavirus supplement.
Early access to super
Individuals affected by the coronavirus will be able to access $10,000 of their superannuation in 2019/20 and a further $10,000 in 2020/21.
To be eligible, you will need to satisfy one of the following requirements:
- Be unemployed;
- Be eligible to receive Centrelink income support; or
- On or after 1 January 2020, you were made redundant; or your working hours were reduced by 20% or more; or if you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.
To access your super, you will need to apply online through myGov before 1 July 2020. To access a further $10,000 in 2020/21, access will be open for approximately 3 months. There will be no tax payable on amounts withdrawn and it will not affect Centrelink payments.
Please contact us on 4304 8888 if you would like more information on any of the above or if we can assist you in any way.