GOVERNMENT COVID-19 STIMULUS - IMPACT FOR RETIREES AND PRE-RETIREES MICHAEL MCLEAN TECHNICAL SERVICES MANAGER CHALLENGER L - ACCURIUM
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Government COVID-19 stimulus
Impact for retirees and pre-retirees
Michael McLean Doug McBirnie
Technical Services Manager General Manager
Challenger l Accurium
Government COVID-19 stimulus
Impact for retirees and pre-retirees
Retirees:
- Deeming rates
- Super minimums
- 2020 economic support payments
- Super contributions for 65 and 66-year-olds
Pre-retirees:
- COVID-19 supplement
- Temporary early access to super
Other measures
What’s next?
Tools and resources
Retirees
4
Deeming rates What are deeming rates? Centrelink/DVA assess certain assets at a standard rate, not actual income, for Income Test: Cash and term deposits Shares and managed funds Account-based pensions (that aren’t grandfathered) Superannuation if > Age Pension age (currently 66+) Short-term annuities 1-5 years (unless longer than life expectancy) Gold bullion Insurance bonds
Deeming rates
Recent changes
Current rates
Single Rate Couple
First $51,800 1% First $86,200
Over $51,800 3% Over $86,200
Announced 12 March 2020 (no longer relevant)
First $51,800 0.5% First $86,200
Over $51,800 2.5% Over $86,200
From 1 May 2020
First $51,800 0.25% First $86,200
Over $51,800 2.25% Over $86,200
1. 1. https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_support_for_retirees_to_manage_market_volatility.pdf
Deeming rates Income and asset strategy zones – Current rates 1. Assumes all assets are financial investments and subject to deeming. 2. Rates and thresholds current at 20 September 2019
Deeming rates Income and asset strategy zones – Rates from 1 May 2020 1. Rates and thresholds as at 20 March 2020. Assumes all assets are financial assets. Based on new deeming rates of 0.25% (lower) and 2.25% (higher)
Deeming rates
Advice considerations
565,000 Age Pensioners will be affected, receiving an average increase of $105 in first year
Review grandfathered account-based pensions
Asset reducing strategies:
- Improvements to the family home
- Spending
- Gifting
- Funeral bond / prepaid funeral expenses
- Plus burial plot
- Super for a spouse less than Age Pension age
- Lifetime income stream commenced on or after 1 July 2019Super minimums
Recent changes for account-based pension
Age Minimum drawdown % of 1 July account balance
< 65 2%
65-74 2.5%
75-79 3%
80-84 3.5%
85-89 4.5%
90-94 5.5%
95+ 7%
1. https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Providing_support_for_retirees_to_manage_market_volatility.pdfSuper minimums Advice considerations Effective immediately for FY 2019/20 and FY 2020/21 If clients have met new minimums already, can stop payments for rest of FY Cannot refund excess payments already paid above minimum back to super Term and lifetime annuities not affected Review grandfathered account-based pensions
2020 economic support payments
Stimulus for income support recipients
2 x $750 payments
Individuals can only receive each payment once
Must be in receipt of eligible payment or concession card1:
Eligible payments Eligible cards
Age Pension Pensioner Concession Card
Disability Support Pension Commonwealth Seniors Health Card
Carer Payment DVA Gold Card
Carer Allowance
Newstart Allowance
DVA Service Pension
DVA War Widows Pension
1. See the following link for full list of eligible payments: https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Payments_to_support_households.pdf2020 economic support payments
First 2020 economic support payment
Eligible if on at least one day during the period from 12 March 2020 to 13 April 2020:
- Reside in Australia, and
- In receipt of at least one of eligible payment or eligible concession card1
Payments will commence from 31 March 2020
90% of payments expected to be made by mid-April2020 economic support payments
Second 2020 economic support payment
Eligible if on 10 July 2020:
- Reside in Australia, and
- In receipt of at least one of eligible payment or eligible concession card1
- Those eligible for $550 COVID-19 Supplement, not eligible for 2nd $750 payment
Payments will commence from 13 July 2020Super contributions for 65 and 66-year-olds Work test and bring-forward rules Current draft legislation proposes: Work test to apply from age 67 (currently age 65) Those aged 65 and 66 on 1 July of the financial year could use bring-forward rule (currently 64 or less) Spouse contributions allowed to be made for persons aged 70-74 (currently 69 or less) Advice considerations: For clients who turn 65 in FY 2019/20, use bring-forward now or wait? Catch-up concessional contributions
Pre-retirees
16COVID-19 supplement Supplement eligibility A supplement of $550 per fortnight will accompany the following payments: Jobseeker Payment Youth Allowance for jobseekers Youth Allowance for students Austudy for students ABSTUDY for students Parenting Payment Farm Household Allowance Special Benefit Commences 27 April 2020 for a six-month period Could be extended further by the Government
COVID-19 supplement
Relaxed eligibility for relevant income support
For Jobseeker Payment / Youth Allowance / Parenting Payment, exemption from:
- Assets Test
- Liquid Assets Waiting Period
- Ordinary waiting period
- Newly arrived resident’s waiting period
- Seasonal worker preclusion periods
For Special Benefit, exemption from:
- Newly arrived resident’s waiting period
Mutual obligations requirement changes
Income Maintenance Period (IMP) and Compensation Preclusion Periods still applyTemporary early access to super
New condition of release
Eligible if one or more of the following apply for clients:
At the time of application they are:
- Unemployed, or
- In receipt of a payment eligible for the COVID-19 supplement, or
On or after 1 January 2020, they:
- Were made redundant, or
- Had their working hours reduced by 20% or more (including to zero), or
- Had their business (if they are a sole trader) suspended or there was a reduction in their turnover of 20% or more.
- 20% reduction = comparison: Pre-1 January 2020 vs Time of application
1. https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Early_Access_to_Super_1.pdfTemporary early access to super
How it works
One withdrawal of up to $10,000 available in 2019/20
One withdrawal of up to $10,000 available in 2020/21
- Only up until 24 September 2020
Relevant for:
- Super accumulation
- Transition to Retirement Income StreamsTemporary early access to super
Advice considerations
Application process:
- Clients can apply to ATO via www.my.gov.au from mid-April
- Client receives determination from ATO
- Client provides determination to their super fund
The lump sum is:
- Not subject to tax
- Not assessable income for social security
- Although is counted as deemed financial asset if not spent
Consider other access to lump sums or income:
- Financial hardship or compassionate groundsOther measures
22Other measures
Intergenerational report postponed
Medicare levy and Medicare levy surcharge 2019/20 thresholds released
Small business measures, include:
- Immediate deduction for depreciating assets < $150,000 (up from $30,000) first used 12 March – 30 June
2020
- Provisions for ‘cash flow boost’ payments between $20,000 - $100,000
Bankruptcy changes, include:
- Minimum debt before creditors can initiate involuntary bankruptcy $20,000 (up from $5,000)
- Timeframe for debtors to comply with bankruptcy notice now 6 months (up from 21 days)
- Directors receive temporary relief from personal liability for insolvent trading if debts incurred in ordinary
course of businessWhat’s next?
24What’s next?
Plan for parliament
Parliament suspended until 11 August 2020
Federal Budget night postponed until 6 October 2020
Some financial advice-relevant legislation in limbo:
- Super contributions for 65 and 66-year-olds
- MLIS – double counting rollovers for TBC
- Death benefit rollovers – tax consequences for those with untaxed element from life insurance proceeds
- Your super, your choice
- Age Pension supplement for overseas travellersTools and resources
26COVID-19 stimulus Helpful information Centrelink: Social security measures https://www.servicesaustralia.gov.au/individuals/subjects/affected-coronavirus-covid-19 ATO: Super and small business measures https://www.ato.gov.au/Individuals/Dealing-with-disasters/In-detail/Specific-disasters/COVID-19/ Treasury: Summary of economic response to the coronavirus https://treasury.gov.au/coronavirus
Upcoming TechHub webinars
April
How different types of SMSF must claim ECPI
Tuesday 21 April 2020
1:30PM – 2.30PM AEST
https://www.accurium.com.au/techhub/2020/04/how-different-types-of-smsf-must-claim-ecpi
Segregation strategies in an SMSF
Tuesday 28 April 2020
1:30PM – 2.30PM AEST
https://www.accurium.com.au/techhub/2020/04/segregation-strategies-in-an-smsfContact us
The information in this presentation has been prepared by Accurium Pty Ltd ABN 13 009 492 219 (Accurium). It is general information only and is not intended to be financial product advice,
tax advice or legal advice and should not be relied upon as such. Whilst all care is taken in the preparation of this presentation, no warranty is given with respect to the information provided
and Accurium is not liable for any loss arising from reliance on this information. Scenarios, examples and comparisons are shown for illustrative purposes only and should not be relied on by
individuals when they make investment decisions. We recommend that individuals seek professional advice before making any financial decisions. This presentation was accompanied by an
oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author.
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