self-managed superannuation fund administrators

ECONOMIC RESPONSE TO THE CORONAVIRUS

coronavius economic response

 

The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.

TEMPORARY EARLY ACCESS TO SUPERANNUATION

Summary

While superannuation helps people save for retirement, the Government recognises that for those significantly financially affected by the Coronavirus, accessing some of their superannuation today may outweigh the benefits of maintaining those savings until retirement.

Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for approximately three months (exact timing will depend on the passage of the relevant legislation).

Eligibility

To apply for early release you must satisfy any one or more of the following requirements:
• you are unemployed; or
• you are 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:
– you were made redundant; or
– your working hours were reduced by 20 per cent or more; or
– if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.

People 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.

How to apply

If you are eligible for this new ground of early release, you can apply directly to the ATO through the myGov website: www.my.gov.au. You will need to certify that you meet the above eligibility criteria.

After the ATO has processed your application, they will issue you with a determination. The ATO will also provide a copy of this determination to your superannuation fund, which will advise them to release your superannuation payment. Your fund will then make the payment to you, without you needing to apply to them directly. However, to ensure you receive your payment as soon as possible, you should contact your fund to check that they have your correct details, including your current bank account details and proof of identity documents.

Separate arrangements will apply if you are a member of a self-managed superannuation fund (SMSF).
Further guidance will be available on the ATO website:
www.ato.gov.au.

Timing

You will be able to apply for early release of your superannuation from mid-April 2020.

Budget impact

This measure is expected to have a cost of $1.15 billion over the forward estimates.

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FOR MORE INFORMATION

For more information on the Australian Government’s Economic Response to the Coronavirus visit
treasury.gov.au/coronavirus.

Businesses can visit business.gov.au to find out more about how the Economic Response complements the
range of support available to small and medium businesses.

 

Minimum annual payments for super income streams | Australian Taxation Office

Minimum annual payments for super income streams

Certain superannuation pensions and annuities are subject to rules that determine minimum and maximum amounts to be paid in a financial year. Once you start a pension or annuity on or after 1 July 2007, a minimum amount is required to be paid each year. There is no maximum amount other than the balance of your super account, unless it is a transition to retirement pension which is not in the retirement phase, in which case the maximum amount is 10% of the account balance.

The minimum payment amounts have been halved for certain pensions and annuities for the 2008–09, 2009–10 and 2010–11 years and reduced by 25% for the 2011–12 and 2012–13 years. The reductions in these years apply only to account-based pensions and annuities (allocated pensions and annuities and market-linked pensions and annuities).

COVID-19 (novel coronavirus) – temporarily reducing superannuation
minimum payment amounts

For many retirees, the significant losses in financial markets as a result of the COVID-19 crisis are having a negative effect on the account balance of their superannuation pension or annuity.

To assist retirees, the Government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% in the 2019–20 and the 2020–21 financial years.

Superannuation and annuity providers calculate the minimum annual payment required at 1 July each year, based on the account balance of the member or annuitant. The 50% reduction will apply to the calculated minimum annual payment.

Example

Robert is 67 years of age. At 1 July 2019, Robert’s account based pension balance was $480,000. Robert’s minimum annual payment was calculated at 5% (the percentage applicable to his age) of his pension balance, which is $24,000. Following the law change, Robert’s required annual minimum pension payment for 2019–20 is $12,000.

If Robert has already withdrawn more than $12,000 for 2019–20, he is not able to put the amount above $12,000 back into his superannuation account unless he’s eligible to make superannuation contributions and subject to any other rules or limits such as contribution caps.

Superannuation pensions and annuities that have already commenced

For pensions and annuities that commence part-way during the 2019-20 or the 2020-21 financial year , the 50% reduction applies to the minimum annual payment that is calculated proportionally on the account balance on commencement day.

Example

Thomas commences an account-based pension on 1 January 2020 at age 66. His pension account balance on the commencement day is $250,000. Under current minimum drawdown requirements, the minimum annual payment amount would be $12,500 (5% of $250,000). As the pension commenced on 1 January 2020, the required minimum amount is calculated proportionately from the commencement day to the end of the financial year:

$12,500 (minimum annual payment amount) × 182 (days remaining) ÷
366 (2020 is a leap year) = $6,215.

Following the temporary reduction in minimum drawdown requirements, Thomas is only required to drawdown 2.5% of his account balance, which is $3,107 ($3,110 rounded up to the nearest 10 whole dollars). If Thomas has already withdrawn over $3,110 for 2019-20, he cannot put the amount above $3,110 back into his superannuation account unless he’s eligible to make
superannuation contributions and subject to any other rules or limits such as contribution caps.

See also:

https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?anchor=Minimumannualpaymentsforsuperincomestrea#

  • Super contributions – too much can mean extra tax (/individuals/super/in-detail/growing-your-super/-super-contributions—too-much-can-mean-extra-tax/)
  • Adding to super if you’re not working (/individuals/super/growing-your-super/adding-to-your-super/personal-super-contributions/?anchor=notworking#notworking).

 

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Note: These withdrawal factors are indicative only. To determine the precise minimum
annual payment (especially for market linked income streams), refer to the pro-rating,
rounding and other rules in the Superannuation Industry (Supervision) Regulations 1994.

Our commitment to you

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations.

If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the information on this website applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice.


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