The Government has announced a second wave of stimulus to help combat the impact of the Coronavirus pandemic. This new wave of stimulus includes some major changes to Superannuation which is likely to affect your SMSF clients for the coming years. Here is what you need to know.
Early Access to Superannuation
The Government has loosened the restrictions on accessing Superannuation due to financial hardship in the wake of the Covid-19 closures. For your clients who are:
- Now unemployed or made redundant
- Receiving Youth Allowance, Jobseeker, Parenting Payment of Farm Household Allowances
- Had their working hours reduced by 20%
- A sole trader with a demonstrated 20% decline in turnover
If your clients are able to meet one of these criteria, they will be able to access $10,000 from their Superannuation account tax free. A second application for $10,000 may be made from July 2020.
The withdrawal will not have any impact on existing Centrelink or Veteran Affairs payments.
The ATO is facilitating the applications and require clients to access their MyGov account to prove their eligibility and apply. Applications open from mid-April.
While this may assist in the short term, we recommend clients seek financial advice before making any withdrawals from their SMSF.
Reduction in Minimum Pension thresholds
Given the market volatility has severely impacted retirement investments, the Government has announced a reduction in the minimum drawdown rates for pensions. This is similar to measures introduced during the GFC and allows your pension clients to retain more funds within their SMSF.
This applies for the 2019 Financial Year and the 2020 Financial Year.
|Age at 1 July|
|Default Rate (%)|
|Reduced Rate (%)|
|95 and over||14||7|
If your clients have already withdrawn the minimum amount since July 2019, either the default rate or the reduced amount, then no further action is required. For those that are yet to draw their pension, we will be providing updated minimum drawdown amounts for SMSFs we manage over the coming weeks.