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Government changes to super – early access to $10k and pension changes

In March 2020, the Federal Government announced a range of financial assistance measures to support Australians impacted by COVID-19. This included a number of temporary changes to superannuation legislation relating to early release of super savings, and a reduction in the minimum drawdown rate for retirees. We have included details of these recent changes below and encourage you to refer to this page regularly for updates. You may also be eligible for other financial assistance, and should be alert for a number of reported COVID-19 related scams in Australia.

Temporary early release of superannuation

From 20 April to 30 June, members who satisfied the eligibility criteria were able to access up to $10,000 of their superannuation in 2019-20 financial year. Eligible members can also access up to $10,000 for the 2020/21 financial year, provided they apply before 31 December 2020 (recently extended from September). For more information, see the frequently asked questions below or refer to the government factsheet.

Before you apply for early access to super, consider:

  • whether there’s other types of financial support available that you could access now
  • the long-term impact on your super savings
  • whether your insurance cover may be affected (especially if your account balance reduces to zero and is closed)
  • if your account balance drops below $6,000 and no contributions are received for 6 months or more, your account may be transferred to an Eligible Rollover Fund (ERF)

For members who’ve applied for early access to super – Once the ATO approves your application and notifies us, we’ll process your payment and transfer it to your nominated bank account. We aim to make these payments within 5 business days from the ATO notification, not including any processing time for your bank to transfer the amount into your account. If your full balance is withdrawn, we’ll close your super account and cease any insurance cover you may have through your super.

Am I eligible?

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 (including to zero); 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 (partners in a partnership are not eligible unless the partner satisfies any other of the eligibility criteria).

For full details of the eligibility criteria, refer to the ATO website.

Some words of caution

It is worth noting that the ATO are taking significant steps, and checking various data sources, to ensure that the strict guidelines and eligibility criteria are being met by applicants. You should carefully check that you meet the criteria and be able to demonstrate your eligibility.

The ATO have also issued clear warnings that where people are deliberately exploiting the system, action will be taken. This includes revoking any determination they’ve issued for your application, meaning the amount paid to you under early release will become assessable income for taxation purposes and will need to be included in your tax return. Providing false or misleading information could lead to penalties of more than $12,000 for each false and/or misleading statement.

How will accessing my super now impact my long-term goals?

We recognise the financial hardship being suffered by a large proportion of the community. However, with all decisions, we encourage members to carefully consider their individual circumstances including their long-term financial situation, objectives and needs – before seeking early access to their retirement savings.

Investment markets have experienced significant losses in recent weeks and there is a risk that unnecessarily accessing your super funds could lead to a compounding negative impact on your retirement outcomes in the long-term.

In simple terms, if you’re considering this early access to super option, it’s worth noting the following:

  • You’ll lock-in any short-term losses
  • You’ll miss out on the likely market rebound
  • You’ll miss out on compound interest

There’s also the more immediate potential impact to your insurance cover, especially if your account balance reduces to zero and is closed. Plus, if your account balance drops below $6,000 and no contributions are received for 6 months or more, your account may be transferred to an Eligible Rollover Fund (ERF).

To calculate the potential impact on your retirement savings, you can use MoneySmart’s Super Withdrawal Estimator.

If you’d like to discuss your options with a professional, we can put you in touch with a financial adviser. Call us on 1800 025 241.

How do I apply?

You can apply directly to the ATO through the myGov website until 31 December 2020 for the 2020-21 financial year, if you meet eligibility conditions. Applications for the 2019-20 financial year have now closed.

For members who’ve applied for early access to super – Once the ATO approves your application and notifies us, we’ll process your payment and transfer it to your nominated bank account. We aim to make these payments within 5 business days from the ATO notification, not including any processing time for your bank to transfer the amount into your account. If your full balance is withdrawn, we’ll close your super account and cease any insurance cover you may have through your super.

What is the online application process?

Upon logging into your myGov account, you will be asked to:

  1. acknowledge and certify that you are eligible for early release of super
  2. input the amount (up to a maximum of $10,000) you would like to release from your super account. Note: if you wish to access money from more than one super account, the total amount cannot exceed $10,000.
  3. input your bank account details for which the money is to be paid into.

After the ATO has processed your application, they will issue you with a determination. The ATO will also provide a copy of this determination to us. Upon receiving your request from the ATO, we will process the superannuation payment as quickly as possible to your nominated bank account. We aim to make these payments within 5 business days from the ATO notification, not including any processing time for your bank to transfer the amount into your account.

Separate arrangements will apply if you are a member of a self-managed superannuation fund (SMSF). Further guidance will be available on the ATO website.

Getting your super savings back on track

If you are one of our members who has been in the position where you have needed to apply for early access to your super, regardless of the amount accessed, we’re here to help you get your super savings back on track when the time is right, to give you the best chance to live the life you want in retirement.

Once you start working again and your finances are otherwise returning to ‘normal’, you could consider the following to help boost your super savings:

  • Making additional contributions to your super on top of the Super Guarantee (SG) amount paid by your employer. It doesn’t have to be one big lump sum – but chipping away with regular contributions can help close the gap created by any amount you’ve had to access now.
  • Combining any multiple super accounts you may have into a single account. Apart from making your super easier to manage, this can help you save on multiple fees and insurance costs. You just need to consider what the loss of any insurance cover means for your circumstances, and any fees charged by your other funds.
  • Reviewing your investment options to make sure you’re in the option/s that could provide the best possible returns based on your risk appetite.
  • Get some financial advice – we have a number of advice options available depending on your needs and can provide you with access to qualified experts over the phone.

Temporary reduction in minimum drawdown rates for retirees

For members with iQ Retirement Pension accounts, the Government is reducing the amount required to be drawn down by 50 per cent for the 2019-20 and 2020-21 financial years. This is not an automatic process though, and your current Pension payments for the 2020-21 financial yearwill remain in place unless you decide to take action and advise us.

We have again communicated directly with our pension account members to confirm how to complete this process, and for eligible members the easiest way is via their online account.

The following table shows the new, reduced rates that apply for the 2020-21 income year.

Age Default drawdown rates (%) Reduced rates (%)
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 more detailed information, please refer to the government factsheet.