The Government is reducing the minimum amounts that retired members must draw down from their income accounts by 50 per cent for the 2019/20 and 2020/21 financial years.

This is a temporary measure introduced by the Australian Government on 22 March 2020 as part of its economic reponse to the coronavirus. You can view other non-super support measures for individuals and households on The Treasury website.

Currently, members with an income account must draw down, or withdraw, a minimum amount each financial year. This amount is a percentage of a member’s account balance, with the percentage dependent on their age.

This new measure aims to help retired members manage the impact of volatility in global financial markets, by reducing their need to sell investment assets to fund the drawdown requirements. This will allow them to preserve more of their capital.

What are the minimum drawdown rates?

AgeOld minimum ratesRates for 2019/20 and 2020/21
Under 654%2%
95 or more14%7%

How do the new rates apply to me?

If you want to reduce your withdrawals for the current financial year, you can do this by logging into your account.

An example of how the new drawdown rates apply

Mike is a 66 year old retiree with an income account.

The value of Mike’s income account  at 1 July 2019 was $200,000. Under current minimum drawdown requirements, Mike is required by legislation to drawdown 5 per cent of his account balance over the course of the 2019/20 and 2020/21 financial years.

This means Mike has to drawdown $10,000 by 30 June 2020 to comply with the minimum drawdown requirements.

Following the temporary reduction in minimum drawdown requirements, Mike will now only be required to drawdown 2.5 per cent of his account balance, that is, $5,000, by 30 June 2020. If Mike has already withdrawn over $5,000 for 2019/20, he is not able to put the amount above $5,000 back into his superannuation account.

On 1 July 2020 the value of Mike’s income account is $180,000 (after drawdowns and investment losses). During 2020/21, Mike is required to drawdown 2.5 per cent of his account balance, which is $4,500, instead of $9,000.

As a result of this change to minimum drawdown requirements, Mike is able to preserve his capital while still drawing an income from his super.

Deeming rates

The Government has reduced deeming rates, to effect from 1 May. The new upper deeming rate is 2.25 per cent, and the lower rate is 0.25 per cent. If you are receiving the Age Pension, the new rates will be automatically applied to your payments.

‘Deeming’ is a way to assess income from financial investments, such as income accounts, savings accounts and term deposits and shares. It’s used to assess eligibility for income support payments, such as the Age Pension.

According to the Government, the reductions in the deeming rates reflect the low interest rate environment and its impact on the income from savings.

The Government stated that the change will benefit around 900,000 income support recipients, including around 565,000 Age Pensioners. On average, they will receive around $105 more of the Age Pension in the first full year the reduced rates apply.

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