There will be no income or assets tests for individuals eligible for early release of superannuation, which was announced on Sunday as a part of the government’s broader second stimulus package designed to support Australian businesses and individuals who suffer financial hardship as a result of the COVID-19.
According to Heffron’s Lyn Formica, head of SMSF and technical services, the earlier rules which allowed access to those suffering from ‘severe financial hardship’ or qualified on ‘compassionate grounds’ were very narrow and were available under very limited circumstances.
The temporary extended rules would allow eligible individuals to access up to $10,000 before 1 July, 2020 and a further amount of up to $10,000 would be available from 1 July, 2020 but only for approximately three months after that time (exact timing to depend on the passage of legislation).
The following individuals would be eligible:
- are unemployed, or
- are eligible to receive a Job Seeker Payment (previously known as Newstart Allowance), youth allowance for job seekers, parenting payment, special benefit or Farm Household Allowance, or
- on or after 1 January 2020:
- were made redundant, or
- had their working hours reduced by 20% or more, or
- for sole traders, their business was suspended or there was a reduction in their turnover of 20% or more.
“Importantly, there is no requirement that the individual is already receiving Commonwealth income support payments and there is no waiting period. The payment can be requested immediately once the new rules come into effect,” Formica said.
Also, there would be no income or assets tests which would mean even someone with a very high salary who remained employed and had other assets could access this payment as long as their salary had been reduced by 20% after 1 January, 2020.
“While they might choose not to, many could well do so if their superannuation is more easily accessed in cash than other assets and if their reduced income is not sufficient to meet living costs that cannot be adjusted quickly to reflect their new situation (eg large mortgage payments, rent etc),” she said.
At the same time, the government announced that that the minimum pension requirements for 2019/20 and 2020/21 would be re-set to half the normal rates and there would be changes to the deeming rates used to calculate an individual’s income for a range of important Government benefits (including the age pension).
“Notably, the Prime Minister and the Treasurer were at pains to describe their economic announcements today as a ‘safety net’ package rather than a ‘stimulus’ package. In other words, the tone is all about surviving rather than prospering.”