COVID-19 Superannuation Support Measures
There have now been laws that have been passed by the Government, in order to implement two key superannuation measures that were previously announced by the Australian Government, to help Australians through the COVID-19 pandemic. This article will explore the COVID-19 superannuation support measures that the Government has passed.
Early access to superannuation
In certain circumstance, up to $20,000 can now be accessed in two tranches by individuals experiencing COVID-19 related financial hardship, as follows:
- up to $10,000 for the 2020 financial year; and
- up to $10,000 for the 2021 financial year.
For early withdrawal eligibility, an individual must:
- not be employed;
- be eligible to receive a youth allowance (only certain types), job seeker payments, parenting payments, farm household allowance or special benefit; and
- after 1 January 2020, have:
- been made redundant
- had working hours reduced by 20%, or more
- as a sole trader, their business has suffered a reduction in turnover of 20% or more, or was suspended.
If you meet the set criteria, you will need to apply to the Australian Taxation Office (ATO) via the MyGov online website portal for access to these funds to be approved.
It currently appears that you will be allowed to apply for the first tranche of relief from April 2020 for the 2020 financial year. The estimated date for the early access applications for the 2021 financial year will be between between July 2020 and September 2020.
There is a restriction on individuals, allowing them to only make one application each financial year. If a request is made for under $10,000 in either financial year, an additional application to release the remaining balance up to the maximum $10,000 threshold will not be approved.
The approved amount can be withdrawn from superannuation following approval by the ATO. A copy of any determination will be sent from the ATO to the applicant, as well as the trustees of the superannuation fund. To avoid any compliance issues down the track, it is crucial that the trustees retain a copy of the determination. Tax will not be payable on amounts accessed early, provided that you receive before withdrawing any money.
Minimum pension withdrawals
The minimum pension drawdown requirements have been reduced to 50% by the Australian Government. Pensioners can now withdraw less money from their superannuation for the 2020 and 2021 financial years.
As a direct result of this, the minimum pension requirements are below:
|Age||Minimum drawdown rates||Reduced rates for the 2019-20|
and 2020-21 financial years
|95 or more||14%||7%|
The minimum pension requirements reduction is only applicable to account-based pensions, allocated pension, transition to retirement income streams and market linked pensions. It is not applicable to any other types of pension, for example, lifetime complying pensions.
There is no requirement to apply to the Australian Taxation Office first because the ability to apply this relief is automated.
It will not be possible to return excess funds to the superannuation fund, if a member has already accessed more than their minimum. The only exception is as a contributor, if eligible. Hence, superannuation members that regularly receive payments from super or those who already have exceeded the minimum, will need to either adjust their payments or stop them, if they do not want to withdraw an amount that is above the minimum required amount.
For individuals that are only withdrawing the minimum pension payment amount, and taking any additional amounts as lump sum payments, there are transfer balance account benefits. It is important that you review your documents, ensuring that they are still effective in achieving the intended result, if you are wishing to take advantage of this strategy.