Canberra has announced changes that have the potential to affect all superannuation fund members as part of the Federal Government’s ‘Safety Net’ package to counter the blows of COVID-19.
There were two significant measures announced – early access to $20,000 for those hardest-hit by the coronavirus and a reduction in the minimum pension drawing requirement for the 2020 and 2021 financial years.
Access to super:
The government will allow individuals experiencing financial stress as a result of the Coronavirus to access $10,000 per year over the next two financial years. To be granted access to super requires an application through myGov, with the first application required before 1 July 2020 and the second in (approximately) three months following 1 July 2020.
In order to apply for early release an individual must satisfy the following new criteria on or after 1 January 2020:
- Reduction in working hours by 20% or more
- Sole trader with business suspended or 20% or greater reduction in turnover
Drawings will be tax-free and have no impact on other government benefit eligibility criteria.
Temporary reduction in minimum superannuation drawdown rates:
Minimum pension drawdown requirements for account-based pensions and similar products will be halved for 2019-20 and 2020-21. Most pensions from self-managed super funds are account-based pensions and so are eligible for the reduction.
No further details are available at this point as to what a ‘similar product’ means. Accordingly it is unclear whether the reduction also applies to the relatively uncommon ‘market linked pension’.
If you have not year drawn your minimum pension for the year we suggest you consider taking advantage of this option to avoid the need to redeem investments that may have dropped significantly in value.