The Australian government has announced another round of economic stimulus to try and mitigate the economic slowdown caused by efforts to contain the spread of the COVID-19 virus. In this article we provide clarity with regard to the announcements relevant to the services we provide.
Currently, pensioners are required to withdraw a minimum percentage of their portfolio each year as a pension payment.
The government has announced they will halve the withdrawal requirements for the 19/20 and 20/21 financial years. This will reduce the need for pensioners to sell portfolio holdings during a sharemarket downturn.
|Age||Default Minimum Drawdown||Default Drawdown for FY20 and FY21|
Eligible individuals will be able to access up to $10,000 of their superannuation before 1 July 2020 and a further $10,000 from 1 July 2020 through to late September (approximately 3 months). Those eligible for early access include:
- Individuals that are currently unemployed or receiving job seeking payments, youth allowance, parenting payments, special benefit payments, or farm household allowances
- Individuals that are made redundant or have their working hours reduced by 20% or more in 2020
- Sole traders whose business is suspended or suffer a reduction in turnover greater than 20%
Any amount withdrawn from super is not subject to tax.
Australians receiving regular government benefits will receive two additional $750 payments, with the first being paid on the 31st of March and the second being paid on the 13th of July. Eligible payments include the age pension, the disability support pension, and a carer payment. You can find a full list of the eligible payments here.
Furthermore, a $550 fortnightly payment will be available to support those whose employment has been affected by COVID-19. For the next six months, the Coronavirus supplement will be available to:
- Full-time workers who have been stood down or otherwise lost employment, sole traders, the self-employed, casual workers, and contract workers
- Individuals required to care for someone who is affected by the Coronavirus
The supplement is not subject to asset testing, however will be income tested.
In a move to reflect the lower interest rate environment and the subsequent flow-on effect to income for retirement savings, the Government will also reduce the pensioner deeming rates for financial investments by 0.75%.
This change will increase payments to income support recipients including Age Pension recipients. The deeming rates from 1 May 2020 will reduce as follows:
|Investment Value||Deeming Rate||Investment Value||Deeming Rate|
|Up to $51,800||0.25%||Up to $86,200||0.25%|
|Up to $51,800||2.25%||Up to $86,200||2.25%|
With the lowered deemed income assessment on account-based income streams, those currently not eligible for the Age Pension may find they are now eligible for the Commonwealth Seniors Health Care Card (CHSCC).
To view the full list of stimulus announcements, please visit the government’s website by clicking here.