Super COVID-19 measures – 4 attempts to help your super – or you.
Super COVID-19 Measures
There are 4 super measures coming or already implemented that will affect your super. Liam Shorte of Verante Financial Planning will tell you more in this episode, recorded on the 31st of March 2020.
Here is what we learned but please listen in as Liam explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
1 – Early $20,000 Access To Super
After 19 April 2020 you can ask the ATO for an early release of your super – limited to two lots of $10,000 – if you meet one of the following conditions:
1 – You are unemployed; or
2 – You are eligible to receive social security payments; or
3 – You were made redundant on 1 January 2020 or thereafter; or
4 – Your working hours were reduced by 20% or more on 1 January 2020 or thereafter; or
5 – You are a sole trader and your business was suspended after 1 January 2020; or
6 – As a sole trader you had at least a 20% reduction in turnover since 1 January 2020.
Social security payments include job seeker payments and parenting payments as well as the youth allowance for jobseekers, special benefit allowance and farm household allowance.
If approved, you can access $10,000 by 30 June 2020 and another $10,000 between 1 July and 24 September 2020.
Only access your super as a last resort. The sharemarket is at an all-time slump and whatever you take out now, will cost you dearly long-term in lost super.
2 – 50% Reduction of Minimum Pension Payments
You can reduce your minimum pension payments by 50% this and next financial year. So 2019/20 as well as 2020/21. If you have already withdrawn more than 50%, then you can only contribute it back into super if you satisfy the work test before your contribution.
This measure is to reduce the need to sell into a weak market to fund your minimum pension payments.
|Age||Regular Minimum (%)||Reduced Minimum|
For 2019/20 and 2020/21
The hope is that these reduced minimums will allow you to preserve your super capital and fund the minimum pension payments out of income, so hopefully there is no need to sell into a weakened market.
3 – Work Test to Re-Contribute Excess Cash
This is still in the pipeline and not yet law. The age from when the work test will kick in is to increase from 65 to 67.
At the moment anybody aged 65+ but under 75 can only contribute to super (apart from mandatory employer contributions) if they pass the work test before they contribute.
To pass the work test you must work at least 40 hours in 30 consecutive days, so roughly 10 hours per week. It doesn’t mean you need to work all year round. You just must have 30 consecutive days in which you worked at least 40 hours. And these 30 consecutive days must have occurred before the contribution.
Once the increase from 65 yo 67 is law, it means that while 65 and 66 the work test no longer applies to you. You can contribute irrespective of whether you work or don’t. The work test will only become an issue once you turn 67.
This is highly relevant at the moment since you want to contribute excess cash back into super. There is a high chance that the asset values will bounce back once this whole COVID-19 drama is over. And you want those capital gains within super where they are taxed at 0% or 15%. This is just what we are thinking. And we have no clue. So please check this with your financial adviser. We don’t know what we are talking about – so please don’t take this as financial advice.
4 – Reduction of Social Security Deeming Rates
It has become easier to qualify for the age pension – for two reasons:
1 – The value of your share portfolio in super has probably gone down, and so it will get easier to pass the asset test.
2 – As of 1 May 2020, the lower and upper deeming rates will go down to 0.25% and 2.25% respectively – significantly lower than what they were before – so it will be easier to pass the income test.
So if you didn’t qualify for the age pension before, you might now. Lodge a new application with Centrelink with the current value of your depleted share portfolio and lower deeming rates – maybe you will pass the asset and income test now.
So these are the current COVID-19 measures that will affect your super and/or pension – or your client’s super and/or pension.
Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 16 March 2021