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The Government's Coronavirus economic support package: super and pension provisions

On 22 March 2020, the Australian Government announced its economic support package to help Australians who are under financial stress as a result of Coronavirus. This legislation has now passed.

We also have a range of support material available to help you better understand these provisions (as well as the other elements of the Government’s economic support package) and to share with your clients:

Early access to Super

One of the support measures announced includes the early release of superannuation designed to help Australians who are under financial stress as a result of Coronavirus.

  • The Government is allowing eligible Australians to apply to withdraw up to:

    • $10,000 of their superannuation in financial year 2019-20 (before 1 July 2020), and
    • Up to a further $10,000 in financial year 2020-21 (from 1 July until 24 September 2020).
       
  • The Government has confirmed that to apply for early release your clients must satisfy any one or more of the following requirements:

    • they are unemployed; or
    • they are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
    • on or after 1 January 2020:
      • they were made redundant; or
      • their working hours at the time they make the application have been reduced by 20 per cent or more compared to the second half of 2019; 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 at the time they make the application compared to the second half of 2019.

    For eligibility requirements for temporary residents please refer to the ATO.

  • Members are now able to apply for early access to their super through myGov.

  • If members are eligible, they can apply directly to the Australian Taxation Office (ATO) through the myGov website: www.my.gov.au. For those that are unable to access online services, they will be able to call the ATO, confirm their identity and complete the application over the phone.

     

    • They will need to certify that they meet the above eligibility criteria.
    • After the ATO has processed an application they will advise Colonial First State, to release a member’s superannuation payment to their nominated bank account.
    • Separate arrangements will apply if your client is a member of a self-managed superannuation fund (SMSF).
    • Further guidance will be available on the ATO website
  • If your client has a SMSF they will also be required to apply for early access via the MyGov website. If the ATO approves their application they will be issued with a determination, which then authorises their fund to mnake the payment.

    For more information, please visit the SMSF frequently asked questions page on the ATO website. 

  • It will take up to 1 to 2 business days for Colonial First State to receive notifications from the ATO once they have approved it. 

  • FirstChoice: Once all the required information has been received we will endeavor to have payments processed within 5 business days. Following processing of payments it can take 3-5 business days for your client to receive the payment in their account, depending on their financial institution.


    FirstWrap:
    Once all the required information has been received we will endeavor to have payments processed within 1-2 days. Following processing of payments it can take 3-5 business days for your client to receive the payment in their account, depending on their financial institution

    Where there is insufficient cash to make the payment (and retain the required minimum level of cash within the account), further steps must be completed to top up the available cash in the cash holding account in order to process the withdrawal request. This adds additional time to the processing time. Please ensure your client has sufficient cash in their cash holding account and that any required trades will also meet the minimum cash balance requirements to cover scheduled payments, fees and costs and transactions following the payment of this claim.

  • Your clients do not need to contact Colonial First State as part of this process.

  • Your clients do not need to contact us to provide us with their bank details or confirm if we have their current bank details in this instance because CFS will use bank details provided to us by the ATO.

  • People accessing their superannuation early in this circumstance will not pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

     

    FirstWrap: If a member is withdrawing from their FirstWrap account any sell downs to fund a redemption may have tax implications for the member. Members should speak with their adviser prior to proceeding.

  • They will be free to recontribute any unused amounts to their superannuation in the future (within contribution caps) if they are eligible.

  • No. TTR pensions and TAPs are non-commutable and lump sums cannot be withdrawn from these pensions under Coronavirus Compassionate Grounds.

  • If they’ve made a claim under normal Compassionate Grounds or Severe Financial Hardship – they can still make a separate claim for Compassionate grounds due to Coronavirus.

     

    Compassionate grounds under Coronavirus is separate from the regular early release of super under Compassionate Grounds or Severe Financial Hardship.

  • The Government has confirmed that members will only be permitted to make one compassionate grounds claim (even if the member holds multiple funds) under Coronavirus this financial year 2019-20. They will also be able to make another claim from 1 July 2020 until 24 September 2020. After this date they will not be able to submit any further claims.

    Note – If your client is an eligible temporary resident they are only permitted to make one application for up to $10,000 from their super for the 2019/20 financial year only (prior to 1 July 2020).

  • If an early release payment removes all the funds from your client’s account, the account will be closed and any insurance that was on the account will be cancelled. Insurance could also be cancelled if your client’s account balance drops to a level where premiums can no longer be funded.

     

    Once an account is closed it can no longer accept any additional contributions (except for some FirstChoice Employer Super accounts – please see below explanation)

     

    NOTE: FirstChoice Employer Super accounts can accept further employer contributions for six months following a full redemption. Please note that receipt of an additional contribution will not restart any insurance cover that was cancelled when the full redemption occurred.

  • FirstChoice: we will pay the withdrawal by making a proportional drawdown across the existing investment weightings in your client’s account.

    FirstWrap: If there is insufficient cash available in your client’s cash account we will contact you and you’ll have until the end of the next business day to provide us with your instructions. If we don’t hear back from you within this time-frame, we will proceed with the payment by performing a sell down of managed funds as per our minimum liquidity process. As described on the PDS, the managed funds we consider most liquid will be sold first.

    Please note that withdrawal requests where there are insufficient funds in your client’s cash account may not meet the target timeframe where payments are made within five business days of receipt of a determination from the ATO due to the time it takes to sell down the investments, and for fund managers to process the redemption requests.

     

  • If your client withdraws part of their balance as an early release payment

     

    If your client has insurance in their super account, sufficient funds will need to be retained in their account to pay insurance premiums. If there is not enough money remaining in their account, their insurance may be cancelled.

     

    If your client withdraws their full balance as an early release payment

     

    If your client withdraws their total super account balance, any insurance cover they have will be cancelled.



  • Yes. Holders of temporary visas are able to apply for the early release of their super under these measures.

    However, please note:
    - Additional eligibility criteria apply depending on which type of visa your client holds, and
    - They are only permitted to make one application for up to $10,000 from their super for the 2019/20 financial year (prior to 1 July 2020).
     

  • As this process is completed by the ATO any identification requirements will need to be provided to the ATO. Your client do not need to provide CFS with any proof of identification documents as part of the application process.

  • The balance shown on MyGov will be from a previous date when CFS last reported to the ATO. The latest update we provided was as at 31 March 2020 (FirstChoice) and 5 April (FirstWrap). As such, the balance shown on MyGov may differ to the actual balance of the account.

    There are several reasons that your account balance may have dropped between then and now. these include but are not limited to:

    • Market movement
    • Insurance premiums
    • Withdrawals
    • Fees and costs
  • The balances displayed on myGov are those that have been most recently reported by super funds and may not be the current balance of their account. Members can check the current balance of their account through FirstNet/FirstWrap.

    Members can apply for an amount that’s higher than the myGov figure (as long as their total application doesn’t exceed $10,000) by typing it into the ‘release amount’ field. If the amount they apply for is greater than their current account balance at the time we make the payment to them, we will pay them the full balance of their account and their account will be closed.

    If they withdraw their total super account balance, any insurance cover they have will be cancelled.

  • No. Individuals can only make one application per financial year, to a maximum of $10,000 across all super funds. If they apply for $10,000 against an account that has only $8,500 – they will only receive the $8,500.

    However, if they have multiple accounts with less than $10,000 in any one account, they are able to nominate more than one account from which amounts are to be released when they apply to the ATO

    For example, if they had two super accounts with $5,000 in each, they will be able to claim $5,000 from each fund at the time they make the application.

  • The ATO has recently confirmed that Trustees are able to defer the transfer of inactive low-balance accounts due in April until October 2020.

    FirstChoice
    : The transfer of these accounts will be deferred until the next run, due in October 2020. We are working through the impacts of this and will provide more information shortly. This has been delayed to prevent members seeing this amount through MyGov and intending to access it through an early release request.

    FirstWrap:
    FirstWrap has already completed the transfer of accounts to the ATO for inactive-low balance accounts dated 31 December 2019. 

     

  • If your client currently have insurance through their FirstChoice/FirstWrap super account they will be covered for Coronavirus. This includes death, total and permanent disablement or income protection insurance (which can provide a regular monthly payment if they're unable to work due to illness or injury). If they need to make a claim related to Coronavirus, as with any other claim, they will simply need to meet the eligibility requirements for your type of cover.

    Coronavirus has no impact on their existing insurance cover with us. While the product disclosure statement provides the insurer with an option to apply an exclusion for pandemics for new members our insurer has informed us they will not be applying that option.

    Please note that if your client's employment hours are reduced this may impact any Salary Continuance Insurance claim that they wish to make.

  • Colonial First State has strong controls in place to monitor suspicious and fraudulent activities. In addition the ATO has also adopted cyber security measures prior to the completion of any Superannuation Early Release application.

    The industry is aware of targeted attempts of fraud and are working closely with the ATO and other financial institutions to monitor and prevent any activity from occurring.

    We encourage members to monitor their accounts for any unauthorised activity and if they have concerns, or they receive suspicious communications , they should immediately raise this with Colonial First State or the ATO. 

  • If there is insufficient cash available in the super account we will contact you or your client to request direction on which investment to sell down to increase the cash account.

    We will allow you and your client  until the end of the next business day to provide us with instructions.

    If we don’t hear back within this time-frame, we will proceed to top up the available cash in the cash holding account by performing a sell down of managed funds as per our minimum liquidity process. As described in the PDS, the managed funds we consider most liquid will be sold first. Once the cash holding account has sufficient available cash for the withdrawal, the payment will be made.

  • Where we receive a direction from the ATO to make a payment and the account contains suspended assets we will pay the maximum available amount. We suggest that members confirm the available funds in their account before nominating accounts and amounts with the ATO.

Temporary reduction in minimum pension payment requirements

One of the support measures announced includes temporarily reducing minimum pension payment requirements for retirees.

  • The Government is helping retirees to manage the impact of volatility in financial markets on their retirement savings by temporarily reducing superannuation minimum drawdown requirements.

     

    Age Previous minimum drawdown rates (%) Default rates (%)
    < 65 4% 2%
    65-74 5% 2.5%
    75-79 6% 3%
    80-84 7% 3.5%
    85-89 9% 4.5%
    90-94 11% 5.5%
    95+ 14% 7%

     

    Minimum percentages are calculated on account balance at commencement of pension and at start of each subsequent financial year.

  • Drawdown changes apply to account based pensions, allocated pensions and market linked pensions, otherwise known as term allocated pensions (and for the equivalent annuity products).

  • Yes, the changes also apply to Term Allocation Pensions (TAPs) and Transition to Retirement Income Streams (TRIS/TTRs).

    • For TTRs - the above reduced minimums will apply but the maximum 10% drawdown limit will remain unchanged and will not be reduced.
    • For TAPs – members will be able to vary their payments between 45% (normally 90%) and 110% of the annual payment amount.
  • FirstChoice pension accounts set up with the Product Disclosure Statement prior to 8 June 2020: Your clients can request to reduce the amount of their pension payment at any time by by completing the ‘Pension Payment Update’ form and uploading it via FirstNet or returning it to us via post.

    They may also call us on 13 13 36 to update their pension payments over the phone.

    Advisers are also able to complete this online or over the phone on their clients' behalf. Adviser Online Transaction Authority is not required.

    Advisers can also send us bulk requests to update their clients’ FirstChoice pension payments by sending us an email to clientmaintenance@cba.com.au with the email subject heading: Change of Pension Payments – Reduction In Minimums.

    FirstChoice pension accounts set up with the Product Disclosure Statement dated 8 June 2020
    : The minimum will move to the new stated Government minimum.

    FirstWrap
    : Your clients can request to reduce the amount of your pension payment at any time by, e-post, by submitting a ‘Change of account details’ form for pension accounts to firstwrap@colonialfirststate.com.au, or over the phone.

  • If they do not elect to change their pension amount, they will continue to receive the original minimum set for the 2019-20 financial year.

  • Yes, your client’s pension will automatically be reduced to the new minimum in the 2020-21 financial year in accordance with the legislation. We will write to your clients in July and provide them with their new yearly pension amount. This letter will also provide them with an opportunity to make additional changes to their payment amount.

  • Minimum percentages are calculated on the account balance at commencement of the pension and at start of each subsequent financial year. 

  • The legislated reduction to minimum pension amounts relates to the 2019-20 financial year and the 2020-21 financial year.

  • Your clients can request to reduce their pension payment at any time.

    FirstChoice
    : They can request to reduce the amount of their pension payment at any time by by completing the ‘Pension Payment Update’ form and uploading it via FirstNet or by emailing it to ClientMaintenance@cba.com.au with the email subject heading: Change of Pension Payments – Reduction In Minimums. We also accept this form via post.

    You can also complete this online or over the phone on their behalf. Adviser Online Transaction Authority is not required.

    We expect to be able to have these requests to reduce pension payments to the new minimum actioned on members accounts prior to 23 April.

    For new pension accounts set up after with the new FirstChoice PDS dated 8 June 2020 the minimum will move to the new stated Government minimum.

    FirstWrap
    : Your clients can request to reduce the amount of their pension payment at any time by submitting a ‘Change of account details’ form for pension accounts to firstwrap@colonialfirststate.com.au, or over the phone. You can also do this for them via e-post.

  • They will not be required to take any additional payments, however we will continue to pay them their current pension amount for the remainder of the 2019-20 financial year unless they have requested to reduce their payments to the new minimum.

     

    If they are happy to continue receiving their current amount, they do not need to do anything and they will continue to receive pension payments as normal.

  • If they have already received pension payments that equal or exceed the reduced minimum annual payment for 2019/20, they can stop future pension payments for the remainder of the financial year by requesting to reduce their payments to the new minimum.

  • The Government has confirmed that they won’t be able to get any pension payments your clients have
    received over the reduced minimum back into their account - unless you are otherwise eligible to contribute to superannuation.

  • Yes, we have completed an out-of-cycle report to Centrelink as many client account valuations have fallen. 

     

    FirstChoice values were reported at 2 April and FirstWrap values at 8 April.

  • FirstChoice: If your client started a new pension on the old Product Disclosure Statement (dated 18 Nov 2019) and selected the minimum you will receive the minimum as disclosed in the Product Disclosure Statement (i.e. the previous minimum). Once the pension was established you could let us know if you’d like to receive the lower amount.

    Anyone setting up a pension on the new FirstChoice Product Disclosure Statement dated 8 June 2020 and selecting a minimum payment will receive the new legislated minimum

    FirstWrap:
    If you set up a pension account on the current Product Disclosure Statement (dated 1 December 2019) and select the minimum, your pension payment amount for the current financial year (2019/20) will be based on the new temporary minimum pension amount, unless you or your adviser request to change it.

  • Superannuation funds are required to calculate the minimum annual payment required at 1 July each year, based on the account balance of the member at that date. For 2020/21, the 50% reduction will apply to the calculated minimum annual payment.

    For example, a member has an account based pension with an account balance at 1 July 2020 of $400,000. The superannuation fund would calculate the minimum annual payment for 2020/21 using the reduced minimums. If the member is age 70 at 1 July 2020, the reduced minimum of 2.5% (instead of the standard minimum of 5%) applies, providing a minimum of $400,000 x 2.5% = $10,000.

If you or your clients are a CommBank customer, you can access a range of support here: https://www.commbank.com.au/latest/coronavirus.html?ei=hp-ban-cvp-default-coronavirus

 

Many of the banks are also providing assistance packages so it’s worth checking with your bank if you need support.

Reducing deeming rates

    • The Government is reducing the deeming rates by a further 0.25 percentage points on top of the already announced 0.5% reduction to reflect the latest cash rate reductions by the RBA.
    • As a result, the lower deeming rate will be 0.25% and the upper deeming rate will be 2.25%.
    • The Government will automatically apply the lower rates from 1 May 2020, with any increased Age Pension entitlements paid from that date.
  • You can read more in this Government factsheet.

Insurance cover for Coronavirus

Your clients with death, total and permanent disablement or income protection within their Colonial First State super account will be covered for Coronavirus.

While the Product Disclosure Statement provides the insurer with an option to apply an exclusion for pandemics for new members, our insurer has informed us they will not be applying that option.

If your client is intending to take advantage of the Government initiative regarding early access to your super and they wish to keep their current insurance cover, please ensure they retain enough funds in their account to cover insurance premiums so that it will not be at risk of being cancelled.

Market volatility continues

Markets continue to feel the effects of Coronavirus. We continue to closely monitor the situation and our teams are regularly communicating with investment managers. Together we’re actively managing the risks and opportunities in investment markets as developments unfold.

We have a wide range of information on our website to help you and your clients, including the latest market updates and tips for managing volatile periods. 

Support for Commbank Customers

CommBank is updating their coronavirus support page regularly with the latest advice and guidance. They’ve also developed a Financial Support Guide which outlines some of the support measures available for individuals impacted, including people whose jobs have been affected and retirees

If you and clients are not Commbank customers, many other banks are providing similar support packages and information so please get in touch with your bank. 

Our business response to Coronavirus

Here are just some of the steps we’re taking to prioritise the health, safety and wellbeing of our employees and limit the impact to our members:

  • We’re closely following advice from the Australian Government and Australia’s Chief Medical Officer and are taking practical precautions in line with the latest guidance from both federal and state authorities. 
  • We have robust remote working capabilities and continue to monitor arrangements to meet the increased use across all our teams.
  • Our business continuity coordinators and leadership teams meet daily to assess the evolving situation and adjust our responses as required.

Be aware of scams involving Coronavirus

Visit the Stay Smart Online website for information about Coronavirus scams and how to stay safe. If you or your client think you have been scammed, you can make a report on the Scamwatch website, and find more information about where to get help.

Support for you and your clients

We have provided a range of online information, resources and self-service options for members available here.

If you would like more information, please contact your local Advice Relationships team or our Adviser Services team on 13 18 36 (8am – 7pm, Monday to Friday, Sydney time).

ADVISER USE ONLY

Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (Colonial First State) is the issuer of FirstChoice Personal Super, FirstChoice Wholesale Personal Super, FirstChoice Pension, FirstChoice Wholesale Pension, FirstChoice Employer Super offered from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557. It also issues interests in the Rollover & Superannuation Fund (ROSCO) and Personal Pension Plan (PPP) offered from the Colonial First State Rollover & Superannuation Fund ABN 88 854 638 840. Colonial First State also issues interests in products made available under FirstChoice Investments and FirstChoice Wholesale Investments. Colonial First State is a wholly owned subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124, AFSL 234945 (the Bank). The Bank and its subsidiaries do not guarantee the performance of FirstChoice products or the repayment of capital for your investment. Colonial First State Custom Solutions is the registered business name of Avanteos Investments Limited ABN 20 096 259 979, AFS Licence 245531 (AIL).  AIL is the trustee of the Avanteos Superannuation Trust ABN 38 876 896 681 which includes FirstWrap Plus Super and Pension, and is the operator of The Avanteos Wrap Account Service which includes FirstWrap Plus Investments. AIL is owned ultimately by Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 (the Bank). The Bank and its subsidiaries do not guarantee the performance of AIL products or the repayment of capital by AIL. This is based on the understanding of current regulatory requirements and laws as at March 2020. This document may include general advice but does not take into account your individual objectives, financial situation, needs or taxation circumstances. You should read the relevant PDS or IDPS Guide before making an investment decision and consider talking to a financial adviser. FirstChoice PDSs can be obtained from from colonialfirststate.com.au or by calling 13 13 36 and FirstWrap PDSs and IDPSs from your adviser or firstwrap.com.au.

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