The Australian Federal Government has responded to the COVID-19 pandemic by releasing three stages of stimulus, focusing on small business, those who have lost their employment, and those who were already receiving government support. Here we step through them, and outline what Class is doing to help ensure our customers can help their clients.
The objective of the multi-round stimulus package is to try and protect the economy from the short-term impact as businesses close their doors as a result of coronavirus, and to keep people employed – economists at the main banks predict unemployment could rise to more than 10% in the coming months.
While the stimulus comes in many forms – including cash into the hands of individuals, PAYG rebates from government to small businesses, and cash paid to companies to keep employees on the books if they need to go into ‘hibernation’ – there are two superannuation adjustments that may impact Class customers.
One of the major components of the support package is to allow individuals who experience hardship to drawdown $10,000 this financial year and next to help them in the short term. They can drawdown $10,000 this financial year and $10,000 next financial year.
Super fund members who wish to avail of this new facility must first register with the Australian Taxation Office, who will decide on eligibility. The process can be started on the MyGov app. You can read more about it here.
The ability for people to access their superannuation has led to the funds and administrators racing to communicate how this will function, along with wider discourse taking place around how the superfunds will manage delivering this revenue to members, and if their liquidity will allow for it. The two regulators – the Australian Prudential Regulatory Authority and the Australian Securities and Investment Commission – have sent a joint letter to all funds telling them to prioritise liquidity in order to meet predicted demand.
To put the extent of the need for support into perspective, the ABC reported that more than 300,000 people registered for JobSeeker payments on March 23 alone, while more than 2 million people visited the MyGov site.
The Actuaries Institute modelled that if 3 million people become eligible, that could mean more than $25 billion in funds would need to be released by the superannuation industry.
In addition to the early access to superannuation in limited circumstances, the government has also announced that the minimum drawdown rates for retirees would be halved, thereby allow them to avoid selling their assets in superannuation to meet drawdown requirements. This reduction will remain in place for the 19/20 and 20/21 financial years. You can read more about it here.
For Class and NowInfinity, this means implementing changes across our systems to ensure our customers can implement these changes for their clients.
There are two areas where Class will be adjusting its functionality: recording the reduction in superannuation minimum drawdown requirements, and in recording access to superannuation funds due to hardship related to COVID-19.
Class has adjusted its drawdown percentages for both FY20 and FY21 as of Friday 3 April 2020.
Class will also be rolling out a new condition for release ‘Compassionate Ground – Coronavirus’ that will allow administrators to log in and record the transaction using the new category. That is schedule for release around Monday 27 April 2020.
Other useful information:
- Class Help Centre: How to update Pension Review to reflect Temporary 50% Reduction in minimum pension drawdown
- Class Help Centre: Temporary 50% reduction in mimimum pension drawdown
- Department of Treasury: Pension Drawdown government fact sheet
- Department of Treasury: Early Withdrawal government fact sheet
- ATO: COVID-19 Information Page
We want to make sure our customers are able to manage their clients through the ongoing legislative changes, so we will keep you updated of what’s happening and how we’re responding through our blog.
The Class team.