You may be able to get some of your superannuation earlier if you are adversely affected financially by COVID-19. This could include losing your job or being made redundant. Those who qualify could withdraw up to $20,000 from their superannuation before 30 June 2020. This includes $10,000 before that date and another $10,000 by 30 December 2020. If you did not withdraw any money during the first round of withdrawals, you are only allowed to withdraw up to $10,000 in the next game.
In fact, due to the coronavirus outbreak, more than half a million Australians applied for early access to their superannuation, taking out almost $4bn. Although accessing your super can provide you with short-term financial relief, should you do it? It’s crucial that those who are considering the same thing understand how it works and the risks involved. This article should provide you with enough information to make an informed choice.
Who can access it super early?
Citizens of Australia and New Zealand
The criteria for Australian and New Zealand citizens and permanent residents is:
- You are unemployed
- You are eligible for one of the following
- JobSeeker Payment
- You can get a Youth Allowance if you’re looking for a job (unless your full-time studies or new apprenticeship are not taking place).
- Payment for parenting (which includes both single and partnered charges).
- Special Benefit
- Farm Household Allowance
- After 1 January 2020, either
- you were made redundant
- Your working hours have been reduced by at least 20% (including zero).
- If you are a sole trader, your business has been suspended, or there has been a 20% reduction in turnover (partners of a partnership cannot be eligible unless they meet any of the other eligibility criteria).
Temporary residents will not be eligible to apply for an early release of super under COVID-19 in the 2020/21 fiscal year. You may be entitled to the Departing Australia Superannuation Payment (DASP) if your visa expires and you leave Australia.
How do I apply?
MyGov is the website where applications will be submitted. Log into your myGov and choose the option to register for early access super. Complete the application, indicating how much you would like to withdraw. If you meet the eligibility criteria, the ATO will review your application and release the funds. The government announced that the application period for the second round will be extended to 31 December 2020.
Can I use my super-early?
The superannuation payment is an extra amount of money that your employer pays on top of your salary. This money goes into your retirement fund, and the fund invests it for you. Some of the money is invested in the stock exchange, and others in various other investments. Compound interest and smart investment decisions are used to build your retirement fund. This will ensure you can live comfortably after retirement. Normally, you cannot access your super fund until you reach 60.
Coronavirus has caused significant financial damage to those affected. The new scheme provides financial assistance to those affected. Accessing your super account is entirely voluntary. It’s only necessary if it feels like it. It’s important to think about the impact it will have on your finances and life in the future.
If you are in severe financial difficulty, you may find that accessing your super can help you keep up with your payments and bills. You can use the money for any purpose. Rent, essentials, or debts can be paid with the money. You can also put it back in your super via voluntary contributions if you no longer need it. Super early access comes with no tax, whereas you are usually taxed when you withdraw your super at retirement.
It would be best if you considered the impact that this early withdrawal will have on your retirement. You are actually removing money from the future by withdrawing funds. It’s important to consider that since super is an investment compounded over time, starting money now won’t reduce your super. Your super may be worth more than $10,000 by the time you retire. The problem with withdrawing your super is that it will reduce the value and potential investment gains over the long term.
Aside from this, there is another downside to withdrawing super early. The stock market has been recovering, but your super fund will have to sell assets to allow you to start your super. This means that you may lose capital and also miss out on the chance to increase the value of your money when the market recovers. Last but not least, early withdrawal of super could affect the insurance within your super.
We, as financial experts, recommend that you are aware of your options if you find yourself in financial difficulty due to Coronavirus. You should consult a financial expert if you are unsure whether or not it is the right decision to take early access to the super.