Laws have now been passed to implement two key superannuation measures previously announced by the Government to help Australians through the COVID-19 crisis.
How can this help you:
Individuals will be able to access up to $20,000 from their superannuation early in order to assist with any financial hardship they are suffering in two tranches:
up to $10,000 for the 2020 financial year; and
up to $10,000 for the 2021 financial year.
To be eligible for this early withdrawal, an individual must:
- be unemployed;
- be eligible to receive a job seeker payment, youth allowance (some types only), parenting payment, special benefit or farm household allowance
- have, after 1 January 2020:-
been made redundant;
had their working hours reduced by 20% or more;
if they are a sole trader, their business was suspended or suffered a reduction in turnover of 20% or more.
At this stage, we have no guidance on the information that will be required by the ATO to substantiate a reduction in working hours or turnover or the suspension of a business (for example, will this only apply if suspension is forced by the government).
If you satisfy the criteria, you will first need to apply to the ATO to be approved to access your superannuation early (you cannot self-assess). This can be done online through myGov.
At this stage, it appears that you will be able to apply for the first tranche of relief (for the 2020 financial year) from mid-April 2020. Applications for early access in the 2021 financial year will need to be made between 1 July 2020 and 24 September 2020 (estimated date only).
Individuals will be restricted to making one application in each financial year. This means if a request is made for less than $10,000 in either financial year then a further application to release the balance up to the maximum $10,000 threshold cannot be made.
Once approved by the ATO, you will be able to withdraw the approved amount from superannuation. The ATO will send a copy of any determination to the applicant and the trustees of the fund. It will be important for the trustees to retain a copy of the determination to avoid compliance issues later. No tax will be payable on the amounts accessed early (provided you have been approved before withdrawing the money).
The Government has also passed a 50% reduction in the minimum pension drawdown requirements. This means pensioners can withdraw less money from superannuation for the 2020 and 2021 financial years.
As a result, the minimum pension requirements for the 2020 and 2021 financial years will be as follows:
|95 or more
This reduction in minimum pension requirements only applies to account-based pensions, transition to retirement income streams, allocated pensions and market linked pensions. It does not apply to other types of pensions (such as lifetime complying pensions).
Also, the ability to apply this relief is automatic – there is no requirement to apply to the ATO first.
However, before reducing payments, pension documents should be checked to ensure they do not force a drawdown at the standard rates. It may be necessary to amend some pension documents to take advantage of this relief.
Unfortunately, if a superannuation member has already taken more than their minimum, it will not be possible to return any excess to the superannuation fund (except as a contribution if eligible). Therefore, for superannuation members who receive regular payments from super, or who have already exceeded the minimum, you will need to either stop or adjust your payments if you do not wish to withdraw an amount above the minimum required.
There are also transfer balance account benefits for only withdrawing the minimum amount as a pension payment, with any additional amounts withdrawn (in excess of the minimum pension requirements) being taken as a lump sum payment. For those who are looking to take advantage of this strategy, you will need to review your documents to ensure they are still effective to achieve the intended result.
If you would like assistance in determining how the measures will assist you, please contact Dickfos Dunn.