Important: This article is for retirees. If you’re a financial adviser, you can read an overview of what the stimulus package means for your clients here.

The changes announced below will impact Australians in varying ways and this information is designed to provide an overview only. For further information on how these changes affect you, please speak to your financial adviser.

If you do not have a financial adviser, we can assist by providing you with a list of financial advisers that are experts in retirement income. Please click here if you would like us to help you to do this.

1. Deeming rates reduce again

It was announced on 12 March 2020 that deeming rates would reduce from 3%/1% to 2.5%/0.5%. However, the Government announced on 22 March 2020 a further 0.25% reduction to the deeming rates which will become effective on 1 May 2020.


Table 1: Deeming rates and thresholds from 1 May 2020

The government has stated that 565,000 Age Pensioners will be affected, receiving an average increase of $105 in first year after the change.

2. Reduction in super income stream minimum payment amounts

An immediate reduction to super minimums for account-based pensions, such as the Challenger Guaranteed Allocated Pension, now applies, halving the previous rates.

Table 2: Account-based pension minimum payments for 2019/20 and 2020/21

If you have already drawn down your super minimum for the financial year, you may be able to stop payments for the rest of the financial year. You should contact your super fund to organise this. Any excess payments already paid above the super minimum amounts cannot be refunded back into super.

Term annuities and lifetime annuities, such as the Challenger Guaranteed Annuity and Challenger Guaranteed Annuity (Liquid Lifetime), are not affected by this measure.

3. ‘2020 economic support payments’ for income support recipients and concession card holders

There will be two payments of $750 to income support recipients and concession card holders that have different eligibility. You can only receive each $750 payment once, even if you are personally eligible for multiple income support payments or concession cards.

First 2020 economic support payment

For this first payment of $750, you are eligible if, on at least one day during the period from 12 March 2020 to 13 April 2020, you:

• are residing in Australia, and
• either:
  • receive an eligible payment including Age Pension, Disability Support Pension, Carer Payment, Carer Allowance, Newstart Allowance, DVA Service Pension, DVA War Widows Pension, or one of the many other payments listed in Appendix A; or
  • receive the Commonwealth Seniors Health Card (CSHC); or
  • receive the Pensioner Concession Card (PCC) (including non-means tested PCCs due to the assets test changes on 1 January 2017); or
  • receive the DVA gold card.

You may have already received this payment, as the first 2020 economic support payment started to be paid from 31 March 2020, with Centrelink/DVA expecting 90% of payments to be made by mid-April.

Second 2020 economic support payment

For this second payment of $750, the eligibility is the same except:

• the relevant date for which you need to be in receipt of an eligible payment/ concession card receipt is 10 July 2020; and
• it is not available if you receive the COVID-19 supplement (see relevant payments list in the next section).

The Second 2020 economic support payment will begin to be paid from 13 July 2020.

4. COVID-19 supplement and relaxed eligibility for relevant payments

A supplement of $550 per fortnight will commence from 27 April 2020 and continue for a six-month period (which may be extended by the Government), if you receive a:

• Jobseeker Payment (and all payments progressively transitioning to JobSeeker Payment; those currently receiving Partner Allowance, Widow Allowance, Sickness Allowance and Wife Pension)
• Youth Allowance for job seekers
  • Youth Allowance for students and apprentices
  • Austudy for students and apprentices
  • ABSTUDY for students getting Living Allowance
• Parenting Payment (Partnered and Single)
• Farm Household Allowance
• Special Benefit

The government is also making some of these payments more accessible and has also made changes to some mutual obligation requirements given the shift away from face-to-face contact.

5. Temporary early access to superannuation

If you haven't yet retired then you will be able to apply to the ATO to receive up to $10,000 from your superannuation in the financial year 2019/20 and again in 2020/21 if you meet certain eligibility. You will have until 24 September 2020 to make an application to the ATO under this condition of release for 2020/21.

To meet eligibility for this condition of release you must meet one or more of the following:

• If, at the time of application, you are:
  • unemployed; or
  • eligible to receive one of the following payments:
    • Jobseeker Payment
    • Youth Allowance for job seekers
    • Parenting Payment (single or partnered)
    • Special Benefit Farm Household Allowance; or
• On, or after 1 January 2020, you:
  • were made redundant; or
  • had your working hours reduced by 20 per cent or more (including to zero); or
  • if you are a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.

If you are in the Challenger Guaranteed Personal Super you will be eligible for this new condition of release. To gain access, you will be able to apply to the ATO via www.my.gov.au from 20 April.

The super lump sum benefit under this condition of release:

• will not be subject to tax; and
• will generally not affect Centrelink or DVA payments (although will be counted as an asset and deemed for income if not spent and kept in cash); and
• can only be used once per financial year.

(For example, you cannot take two withdrawals of $5,000 in financial year 2019/20, but must make one withdrawal of up to $10,000).

Note, you may also be eligible for other existing conditions of release such as financial hardship or compassionate grounds.

6. JobKeeper Payment

On 30 March 2020 the Government announcement this measure, but importantly it is not yet law.

The Government will provide a wage subsidy to around six million workers who will receive a flat payment of $1,500 per fortnight (equivalent to 70% of the national median wage) through their employer, before tax. An employee will only be eligible to receive this payment from one employer. 

The payment will be open to eligible businesses that receive a significant financial hit caused by the coronavirus. Self-employed individuals are also eligible to receive the JobKeeper Payment.

The payment will be paid to employers, for up to six months, for each eligible employee that was on their books on 1 March 2020 and is retained or continues to be engaged by that employer.

The program will commence on 30 March 2020, with the first payments to be received by eligible businesses in the first week of May. It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment. 

Eligible businesses can apply for the payment online and are able to register their interest via ato.gov.au from 30 March 2020. Employees will receive a notification from their employer that they are receiving the JobKeeper Payment.

Appendix A – list of payments for First 2020 economic support payments

Centrelink:

• Age Pension
• Disability Support Pension
• Carer Payment
• Parenting Payment
• Wife pension
• Widow B Pension
• ABSTUDY (living allowance)
• Austudy Payment
• Bereavement Allowance
• Newstart Allowance
• Jobseeker Payment
• Youth Allowance
• Partner Allowance
• Sickness Allowance
• Special Benefit
• Widow Allowance
• Family Tax Benefit, including Double Orphan Pension
• Carer Allowance
• Farm Household Allowance

DVA:

• Service Pension
• Income Support Supplement
• Compensation payments, including lump sum payments
• War Widow(er) Pension
• Veteran Payment
• Education Scheme recipients
• Disability Pensioners at the temporary special rate
• Income support pensioners at $0 rate

Appendix B – Key websites

Centrelink: servicesaustralia.gov.au/individuals/subjects/affected-coronavirus-covid-19

ATO: ato.gov.au/Individuals/Dealing-with-disasters/In-detail/Specific-disasters/COVID-19/

For further information on how these changes may affect you, please speak to your financial adviser.

If you do not have a financial adviser, we can assist by providing you with a list of financial advisers that are experts in retirement income. Please click here if you would like us to help you to do this.

For general information, call us on 13 35 66 (from 8am to 6pm AEST, Monday to Friday), email us at info@challenger.com.au or fill in our enquiry form. Please note Challenger is unable to change any account details or provide any policy specific information through email.