With these unprecedented times of the COVID-19 pandemic, the Federal Government has announced a second economic stimulus package worth $189 billion. But what does this mean for retirees and pensioners?
Read on to find out what’s in the Economic Stimulus Package to help retirees and pensioners.
- Cash payments to lower income households
- Reduction of pension minimum drawdown rates
- Reducing social security deeming rates
Cash Payments to Lower Income Households
Pensioners, veterans, social security, other income support recipients and eligible concession card holders will receive up to two payments of $750 as part of the Government’s $189 billion plan to prevent the economy sliding into recession following the coronavirus pandemic.
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.
Please note if you are receiving an income support payment, such as JobSeeker, that is eligible to receive the Coronavirus supplement you will not be eligible for the second payment of $750.
Cash payments will be tax free and not count as income for pensioners and welfare recipients.
For more information click on the fact sheet.
Reduction of Pension Minimum Drawdown Rates
The Government will be temporarily reducing the superannuation minimum drawdown amounts for account-based pensions and similar products by 50% for the 2020 and 2021 income years.
This means that the total minimum annual pension amount that a superannuation fund is otherwise required to pay to a member receiving a pension from the fund (e.g., an account-based pension) will be reduced by half for these two income years. This is due to many retirees losing a significant portion of their super account balance as sharemarkets have plunged due to the Coronavirus crisis. This rule change assists retirees who do not wish to sell their investment assets while the value of those assets is reduced.
Reducing Social Security Deeming Rates
From 1 May 2020, the Government is also reducing both the upper and lower social security deeming rates by a further 0.25 percentage points in addition to the 0.5 percentage point reduction to both rates announced on 12 March 2020.
These reductions reflect the low interest rate environment and its impact on the income from savings. Broadly speaking, the social security deeming rates apply (for ‘income test’ purposes) to determine the amount of income that an individual is ‘deemed’ (or taken to) earn from financial investments (e.g., cash deposits and listed securities), irrespective of the actual amount of income (e.g., interest income and dividend income) earned by the individual. In most cases, the deeming rates apply for the purposes of applying the Age Pension ‘income test’.
- 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 May 1.
For more information click on the fact sheet.
If you would like to discuss the above in more detail with your Accountant, please contact us.
Disclaimer: This new post is intended to provide a general summary only; the information is subject to change and should not be relied on as a substitute for professional advice.
