On 22 March 2020, the Australian Government announced a stimulus package that included measures to support retirees in response to the COVID-19 impact on superannuation savings. The main measures relating to retirees and superannuation are as follows:
1. Temporarily reducing superannuation minimum drawdown rates
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50% for 2019-20 and 2020-21 income years.
This measure will benefit retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements.
Age Default minimum drawdown rates (%) Reduced rate by 50 per cent for the 2019-20 and
2020-21 income years (%)
Under 65 4 2
65-74 5 2.5
75-79 6 3
80-84 7 3.5
85-89 9 4.5
90-94 11 5.5
95 or more 14 7
For example, under current minimum drawdown requirements, a 66-year-old retiree is required by legislation to drawdown 5% of their account balance over the course of the 2019-20 and 2020-21 income years. Following the temporary reduction in minimum drawdown requirements, the retiree will now only be required to drawdown 2.5% of their account balance.
If the retiree has already withdrawn over the reduced rate for 2019-20, they will generally not be able to put the amount above the reduced rate back into their superannuation account – the rules surrounding the limits on contributions must be met.
2. Temporary early release of superannuation
The Government is allowing eligible individuals impacted by COVID-19 to apply online through myGov to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.
Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
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.
Self-managed superannuation fund (SMSF)
Separate arrangements will apply if you are a member of a SMSF. Further guidance will be made available by the ATO.
You will be able to apply for early release of your superannuation from mid-April 2020.
3. Reducing social security deeming rates
As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate will be 0.25%.
For example, assume an age pensioner couple have $550,000 worth of financial assets and hold $300,000 in a superannuation account with a conservative investment strategy which returned around 5% last year. They have invested $130,000 in a term deposit with an annual return of 1.5% and hold the remainder in a cash transaction account earning a negligible rate of interest. Under the former deeming rates, the couple’s Age Pension would have been reduced by $65 each per fortnight. Under the new deeming rates, the couple’s Age Pension will only be reduced by around $32 each per fortnight.
The reductions reflect the low interest rate environment and its impact on the income from savings.
If you have any questions about your eligibility for any of the above superannuation measures or need assistance accessing the support measures announced, please contact your Blaze Acumen advisor.