Issue 742, 23 March 2020
In this issue:
- COVID-19 changes to superannuation rules
- COVID-19: APRA & ASIC reprioritise activities
- COVID-19: impacts on Budget and Parliamentary sittings
- MySuper heatmaps: new APRA FAQs
COVID-19 changes to superannuation rules
In response to the COVID-19 Coronavirus pandemic, the Government has announced that it will urgently make important changes to the rules around early access to superannuation and the minimum draw-down for superannuation pensions.
1. Early release of superannuation
The Government has announced it will allow individuals in financial stress as a result of the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21.
Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for approximately another three months (with the exact timing dependent on the passage of the necessary legislation). They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
To facilitate the release, the Government will amend the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) to establish a new compassionate ground of release. It will also amend the Income Tax (Transitional Provisions) Act 1997 to ensure the amounts released are not subject to tax.
In order to apply for early release under the new ground, an individual must certify that they satisfy any one or more of the following requirements when they apply:
- they are unemployed; or
- they are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance; or
- on or after 1 January 2020:
- they were made redundant; or
- their working hours were reduced by 20 per cent or more; or
- if they are a sole trader – their business was suspended or there was a reduction in their turnover of 20 per cent or more.
Once the ATO has processed an application for early release under the new ground and has issued a determination, the nominated superannuation fund will be required to release the monies to the individual as soon as practicable without requiring any further application by the individual to the fund. A new operating standard will be introduced into the SIS Regulations to give effect to this.
Treasury has published a factsheet on this measure.
2. Temporary reduction in superannuation minimum drawdown rates
The Government will also temporarily reduce superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21, to give retirees more flexibility as to how they manage their superannuation assets. Treasury has published a factsheet on this measure.
The Government has today introduced into Parliament the Coronavirus Economic Response Package Omnibus Bill 2020 to give effect to these amendments.
The Government has also announced reductions in the social security deeming rates—the rates the Government deems income support recipients, including Age Pensioners, to be earning on certain financial assets. As of 1 May 2020, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent. Treasury has published a factsheet on this measure.
COVID-19: APRA and ASIC reprioritise activities
APRA and ASIC have each announced that in response to the COVID-19 pandemic, they have suspended the majority of their planned policy initiatives until at least 30 September.
APRA has indicated its decision will allow APRA-regulated entities to dedicate time and resources to maintaining their operations and supporting customers, while also enabling APRA to intensify its focus on monitoring and responding to the impact of a rapidly changing environment on entities’ financial and operational capacity.
APRA is suspending all substantive public consultations and actions to finalise revisions to the prudential framework that are currently underway or upcoming, including consultations on prudential and reporting standards. It will keep the situation under review, but presently does not plan to recommence consultation on any non-essential matters before 30 September 2020.
APRA may continue to progress certain data reporting initiatives where they are critical to meeting its mandate in the current environment, including new data collections related to the impacts of COVID-19.
APRA is also reconsidering the implementation dates and transition timeframes for prudential and reporting standards that have been recently finalised but not yet implemented. Further details on any adjustments will be provided shortly.
ASIC has indicated it is focussing its regulatory efforts on challenges created by the COVID-19 pandemic, and until at least 30 September 2020, the other matters that ASIC will afford priority are where there is the risk of significant consumer harm, serious breaches of the law, risks to market integrity and time-critical matters.
ASIC has immediately suspended a number of near-term activities which are not time-critical. These include consultation, regulatory reports and reviews, such as the ASIC report on executive remuneration, updated internal dispute resolution guidance and a consultation paper on managed discretionary accounts. Stakeholders will shortly be notified of deferred consultation and publications relevant to them.;
ASIC has stated that it is committed to working constructively and pragmatically with the firms it regulates, mindful they may encounter difficulties in complying with their regulatory obligations due to the impact of COVID-19. Where warranted, relief or waivers from regulatory requirements will also be provided.
COVID-19: impacts on Budget and Parliamentary sittings
The Government has announced that due to the COVID-19 pandemic, the Budget will be deferred from 12 May to 6 October. The release of the next Intergenerational Report will also be deferred, to mid-2021.
Parliamentary sittings will be significantly impacted as a result of the pandemic. In particular, the sittings scheduled for this week have been reduced—potentially to one day—to pass legislation essential to facilitate the Government’s COVID-19 stimulus packages.
MySuper heatmaps: new APRA FAQs
On 19 March APRA released a new set of frequently asked questions (FAQs) to announce plans to update the MySuper Product Heatmap in June 2020 with the latest fees and costs data. This follows on from the release of the initial heatmaps last December – see ASFA Action issue 730.
The new FAQs are available on the APRA website.
Given the announcement that APRA is suspending the majority of its policy initiatives given the COVID-19 pandemic, it is not presently clear whether the heatmap release will go ahead.
ASFA REGULATORY WATCHLIST
ASFA’s Regulatory Watchlist (ARW) tracks developments in Legislation, inquiries, consultations
and other regulatory announcements relevant to superannuation.
