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Since COVID-19 began to make a significant difference to Australian life in early March, Prime Minister Scott Morrison and Treasurer Josh Frydenberg have said they have three main economic priorities: to keep people in work, keep businesses open and ensure the economy bounces back when the spread of the virus abates.
Beyond this, there are a number of knock-on effects to the economy and the finances of everyday Australians. In this article we summarise the key announcements that apply to superannuation and pensions.
Cash payments to pensioners
Pensioners, veterans, other income support recipients and concession card holders will receive two payments of $750 as part of the government’s $189 billion plan to prevent the economy sliding into recession following the coronavirus pandemic.
Cash payments will be tax free and not count as income for pensioners and welfare recipients. The first payments will be made from 31 March 2020 on a progressive basis, and the second payments will be made from 13 July 2020.
Temporary reduction of pension minimum drawdown rates
The government is temporarily halving the minimum drawdown requirements for account-based pensions and similar products for the 2019-20 and 2020-21 financial years. This rule change assists retirees who do not wish to sell their investment assets while the value of those assets is reduced.
In the wake of the GFC, minimum payment amounts were halved for account-based pensions and annuities for 2008-09, 2009-10 and 2010-11, and reduced by 25% for 2011-12 and 2012-13.
Deeming rates lowered
Approximately 900,000 Australians (including around 565,000 Age Pensioners) are due for an increase in their fortnightly social security payments following the government’s decision to reduce deeming rates in response to changing economic conditions and the RBA’s lowering of interest rates.
The lower deeming rate (for financial investments up to $51,800 for single pensioners and $86,200 for couples) will be cut from 1.0% to 0.25%.
The upper rate (for financial investments over $51,800 for single pensioners and $86,200 for couples) will decrease from 3.0% to 2.25%.
The extra money will start flowing through into pensioners’ bank accounts from 1 May.
Temporary early release of superannuation
Individuals affected by the coronavirus will be allowed to access up to $10,000 of their superannuation in each of the 2019-20 and 2020-21 financial years. Individuals will not need to pay tax on amounts released, and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.