Superannuation and COVID-19

The Federal Government has announced a range of measures to help Australians in these strange and difficult times, including a relaxation of the preservation rules to allow super fund members to access their super in times of need.

Members are already able to access benefits when experiencing “severe financial hardship” or on other, compassionate grounds.

Munro Doig’s knowledgeable tax, superannuation and estate planning lawyers can support you in challenging times.  If you’re not sure how, but suspect you may need some guidance on taking stock and sorting things out, you’re welcome to give us an obligation-free call.

Releasing benefits – the existing rules

The preservation rules prohibit fund trustees from releasing benefits unless a “condition of release” is satisfied, with retirement and turning 65 the most common.

Condition of release – severe financial hardship

A fund member is in severe financial hardship if satisfied (based upon evidence from the relevant Government agency) that the person had been receiving income support payments for at least:

(a)   26 weeks and is unable to meet reasonable and immediate family living expenses; or

(b)   39 weeks after reaching their “preservation age” (which could be anywhere from 55 to 60 depending on the year in which you were born) and were not gainfully employed on the date they       applied for the release.

A member satisfying condition (a) is able to access benefits of between $1,000 and $10,000 in any 12 month period.  There is no such restriction on a member who satisfies condition (b).

Condition of release – compassionate grounds

This involves the member writing to the ATO and asking it for a “determination” that his or her benefits be released because they do not have the financial capacity to pay for:

(a)   medical treatment or medical transport for the member or their dependants;

(b)   a mortgage repayment, where not making the repayment would result in foreclosure on the member’s home;

(c)   modifications to the member’s home to accommodate their disability (or that of their dependants);

(d)   palliative care (either their own or that of a dependant);

(e)   expenses associated with a dependant’s death and funeral.

The ATO has the ability to issue a determination even if the member’s circumstances do not strictly come within one of the above categories, as long as it is “consistent” with them.

New measures

Amongst the new tax incentives and rebates to assist businesses and individuals, the Government last week announced (a) a temporary reduction in income stream minimum drawdowns; (b) early access to up to $20,000 of benefits; and (c) temporary reductions in the amount of “deemed” income social security recipients are treated as having received from their savings (which may increase the person’s social security entitlements).

(a)   Temporary reduction in minimum drawdowns

Given losses are only theoretical until you’ve actually sold the asset, the minimum annual drawdown required to still be a “pension” for SIS purposes has been reduced as follows:

Age Existing minimum drawdown (%) New rates for 2019/20 & 20/21 (%)
< 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 ≤ 14 7


(b)   Early access to up to $20,000

This measure allows certain individuals to access up to $10,000 before 1 July 2020 and a further $10,000 from 1 July, until (about) the end of September.

To be eligible, the fund member must satisfy one of the following:

(i)   be unemployed;

(ii)   be eligible to receive certain Centrelink payments; or

(iii)   on or after 1 January 2020:

  • have been made redundant;
  • had working hours reduced by at least 20%; or
  • if a sole trader, had your business suspended or experienced a reduction of at least 20% in turnover.

Applications are to be made through the MyGov portal, from mid-April.

(c)   Change to social security deemed income rates

Certain “financial assets” like savings, managed investments, shares and account-based super pensions are deemed to earn a certain amount of income for the purposes of calculating a person’s age pension entitlements.  The actual amount deemed depends on your status (i.e. single or couple, etc.)

The % varies depending on the asset, and was between 1% and 3% of the asset’s value.

The changes reduce the lower level to 0.25% and the upper level to 2.25%.