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Extension of reduction to minimum income stream benefits

Legislation updates

Posted in: Legislation
Published: 13/07/2021

Sean Fannin, GBST’s Technical Legislation Consultant reviews the latest legislation that could affect wealth management administration platforms.

 

 

 

What legislation is affected?

Superannuation Legislation Amendment (Superannuation Drawdown) Regulations 2021

Certain superannuation pensions and annuities are subject to rules that determine minimum and maximum amounts to be paid in a financial year. A minimum amount must be paid each year for pensions or annuities commenced on or after 1 July 2007. For many retirees, the significant losses in financial markets as a result of the COVID-19 crisis is having a negative effect on the account balance of their superannuation pension or annuity. As part of the Australian Government’s economic response to the COVID-19 pandemic, the government reduced the minimum income stream benefit payment rates that must be paid by a superannuation fund trustee.

 

What has changed?

On 29 May 2021, Scott Morrison, Josh Frydenberg, and the Minister for Superannuation, Financial Services, and the Digital Economy, and the Minister for Women’s Economic Security, Jane Hume, announced the extension of the temporary reduction of the minimum income stream benefit payment rates.

On 24 June 2021, the Superannuation Legislation Amendment (Superannuation Drawdown) Regulations 2021 was registered. The legislative instrument makes amendments extending the temporary reduction in the minimum income stream benefit payment amounts for account-based pensions and annuities, allocated pensions and annuities, and market-linked income streams for the 2021/22 financial year.

 

Who will this impact?

Account-based/allocated pensions and annuities

The minimum income stream paid by superannuation fund trustees using account-based pensions or annuities and allocated pensions or annuities will be reduced by 50% for the 2021/22 financial year.

The minimum income stream benefit payment is rounded to the nearest $10 unless the amount ends in an exact $5, in which case, the benefit payment is rounded up to the next whole $10.

 

Market-linked income streams

The amount paid from a market-linked income stream can generally be no less than 10% or not greater than 10% of the amount calculated using the relevant payment factors.

The amendments made by the Superannuation Legislation Amendment (Superannuation Drawdown) Regulations 2021 extends into the 2021/22 financial year if it meets specific criteria. This includes:

  • 45% or more of the amount calculated using the relevant payment factors is paid
  • Less than 110% of the amount calculated using the relevant payment factors is paid

Sources for more information 

Joint Media Release – The Prime Minister, the Hon. Scott Morrison MP, the Treasurer, the Hon. Josh Frydenberg MP, and the Minister for Superannuation, Financial Services and the Digital Economy, and the Minister for Women’s Economic Security, Senator the Hon. Jane Hume – Supporting Retirees with Extension of the Temporary Reduction in Superannuation Minimum Drawdown Rates:

https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/supporting-retirees-extension-temporary-reduction

Superannuation Legislation Amendment (Superannuation Drawdown) Regulations 2021:

https://www.legislation.gov.au/Details/F2021L00833

Superannuation Industry (Supervision) Regulations – Schedules 1A, 1AAB, 6, and 7:

http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_reg/sir1994582/sch1a.html

http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_reg/sir1994582/sch1aab.html

http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_reg/sir1994582/sch6.html

http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_reg/sir1994582/sch7.html

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