Over the past two weeks the Government has announced two economic stimulus packages to cushion the economic impact of the Coronavirus. A total of $189 billion is being injected into the economy by all arms of Government in order to keep Australians in work and businesses in business. This includes $17.6 billion for the Government’s first economic stimulus package, $90 billion from the RBA and $15 billion from the Government to deliver easier access to finance, and $66.1 billion in yesterday’s economic support package. There are some important superannuation measures that you should be aware of:

Temporarily reduce superannuation minimum drawdown rates

The Government have agreed to temporarily reduce superannuation minimum drawdown requirements for account based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.

Individuals who have already taken their minimum pension amount for the 2019/20 financial year will not able to put that money back into his superannuation account under these changes. If you have direct debit set up for pension payments and you do not wish to take any more pension payments from the fund this year you will need to contact your financial institution or financial advisor and ask for assistance in stopping these payments.

Reducing social security deeming rates

As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings. The change will benefit around 900,000 income support recipients, including around 565,000 people on the Age Pension who will, on average, receive around $105 more from the Age Pension in the first full year that the reduced rates apply. The changes will be effective from 1 May 2020.

For example,

Jan and Brian are an age pensioner couple. They have $550,000 worth of financial assets. They hold $300,000 in a superannuation account with a conservative investment strategy which returned around 5 per cent last year. They have invested $130,000 in a term deposit with an annual return of 1.5 per cent and hold the remainder in a cash transaction account earning a negligible rate of interest. Under the former deeming rates, Jan and Brian’s Age Pension would have been reduced by $65 each per fortnight. Under the new deeming rates, Jan and Brian’s Age Pension will only be reduced by around $32 each per fortnight.

Early release of superannuation

While superannuation helps people save for retirement, the Government recognises that for those significantly financially affected by the Coronavirus, accessing some of their superannuation today may outweigh the benefits of maintaining those savings until retirement. Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for approximately three months (exact timing will depend on the passage of the relevant legislation). The exact eligibility requirements will be formed in the coming days but broadly 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; 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.

People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments. If you are eligible for this new ground of early release, you can apply directly to the ATO through the myGov website: https://my.gov.au/. Separate arrangements will apply if you are a member of an SMSF. You will be able to apply for early release of your superannuation from mid-April 2020.

Renting a Commercial Property to yourself – Non Arm’s Length Arrangements

SMSFs are allowed to rent commercial property to a related entity (i.e. – your own business), as long as it is done on arm’s length terms. We are of the view that if an SMSF trustee were to give their related party a short term ‘rent holiday’ on the grounds that this is an exceptional circumstance that this would NOT be a breach of the arm’s length terms. We base this on the fact that we believe there are currently third party tenants negotiating such terms with third party landlords. We have direct notification of a 50% rent reduction to third party tenants and have heard anecdotal evidence of 100% rent holidays (reviewed on a monthly basis).
However, we have not had this confirmed by government. I am currently seeking confirmation from our auditor and government that they would not devote compliance resources to such an arrangement and I will get back to you when I have more information.

How can we help?

In the first instance, please make sure you have ‘liked’ our Facebook page.  This is where we will post a lot of information in the coming days and should help to filter a lot of the noise! If you need assistance with understanding any of these recent announcements, please feel free to give me a call so that we can discuss your particular requirements in more detail.  Feel free to forward this information to anyone you feel might benefit from it. The more we can help people understand the various options available to them, the better. 


Daniel Simmons.