The impact of the Coronavirus has created a great deal of uncertainty, caused widespread disruption around the world, sharemarket falls, and is a very dynamic situation. If you are concerned about how this impacts you personally, we encourage you to get financial advice.
All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. Learn more
On 22 March 2020 the federal government announced a temporary measure due to the effects of coronavirus on the economy. This new rule allows individuals to access up to $10,000 of their superannuation in 2019/20 and a further $10,000 in 2020/21.
You can apply for early release of your super from 20 April, provided you satisfy one or more of the following:
- You are unemployed
- You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (including the single and partnered payments), special benefit or farm household allowance
- On or after 1 January 2020:
- You were made redundant
- Your working hours were reduced by 20% or more
- If you are a sole trader and your business was suspended or your turnover has reduced by 20% or more.
If you have money in more than one super fund, you can withdraw from multiple accounts provided the total amount does not exceed $10,000 in one financial year. For example, if you wish to withdraw the full $10,000 allowed in 2019/20 you could withdraw $9,000 from one fund and $1,000 from another.
Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
On 4 April 2020 it was announced that these temporary rules would also apply to most temporary visa holders with work rights, including international students and temporary skilled visa holders.
How to apply
Treasurer Josh Frydenberg said the process is designed to be frictionless, with eligible individuals able to apply online through the MyGov website rather than going to their super fund. However, you will need to certify that you meet the above criteria.
Your application will then be handled by the ATO. If it finds you are eligible, it will notify your super fund to release your super payment. Payments are expected to be made within 5 days of application.
The temporary early access measures are available to members of accumulation funds (not pension accounts). This includes defined benefit funds although it is up to the fund to decide whether or not to release the amount.
Separate arrangements apply to SMSFs, with guidance to be available on the ATO website. At the time of writing, these details were not yet available, but the ATO do provide the following Q&A:
Question: One of the members of my SMSF wants to apply for release of their super under the COVID-19 early access arrangements, what do I do?
Answer: Your member can apply for release of their super under the COVID-19 early access arrangements through myGov. We will then issue them with a determination advising of their eligibility to withdraw an amount. When you receive the determination from your member, you will be authorised to release the amount of super stated in the determination. If the current balance of the member’s account is less than the amount approved in the determination, you can release the lesser amount.
The amount is not subject to PAYG withholding and does not need to be reported on a PAYG payment summary.
Note: Applications for 2020/21 need to be made before 31 December 2020.
A popular measure
In announcing the temporary early release of superannuation measures, Prime Minister Scott Morrison rightly said that it’s your money.
The early indications are that most Australians agree.
In a snap poll of 723 Australians aged 18+, 79% of respondents agreed that people in financial difficulty should be able to access up to $20,000 of their super. Market research group Roy Morgan conducted the SMS survey the day following the government’s announcement.
The ATO announced on 20 April that to date there had been 975,300 registrations of interest. The ABC reports that Assistant Minister for Superannuation Jane Hume has said the federal government “expects around 1.6 to 1.7 million Australians will apply for early release of superannuation and that will equate to about $27 billion to come out of the system,”.
On 28 April Treasury announced that so far the ATO has approved 757,000 applications, with the average withdrawal being approximately $8,300.
Early access should be a last resort
While super is indeed your money, it’s worth remembering that the hole in your retirement savings will also be your money.
SuperRatings estimate that a 25-year-old withdrawing $20,000 from their super over the next 12 months could lose $58,000 from their super balance at retirement in today’s dollars. A 35-year-old could lose $45,000 and a 45-year-old could lose $35,000.
The chart below shows the figures in today’s dollars, and in future dollars (allowing for 2% inflation).
Source: SuperRatings. Assumptions based on ASIC’s MoneySmart calculator using a Growth option with an assumed investment return of 5% before fees and taxes on earnings.
These are rough estimates based on averages, but they do give a sense of what is at stake.
Explore all your options
Many Australians currently face, or may soon face, real financial hardship. But before accessing your super, it’s worth exploring other sources of emergency funds announced as part of the government’s coronavirus support packages for individuals and households.
Retirees might also consider accessing the equity in their home via the government’s Pension Loans Scheme.
We will provide updates as soon as the government releases further details about temporary access to your super.
Treasury has provided the following example scenarios to better understand the temporary measures:
Ed the bartender
Ed works in a popular bar in Melbourne. As a result of the coronavirus, Ed has had his work hours reduced from 40 hours on average in the second half of 2019 to 20 hours per week on average in May 2020. As a result, Ed determines that his hours over the last month have reduced by more than 20 per cent compared to the average of his hours over the last six months of 2019.
Ed decides to apply for the early release of $8,000 of his superannuation in May 2020 to help pay his rent and other living expenses. Ed self-certifies that he is eligible for early release on myGov. He could have applied for up to $10,000 but chose not to. Ed cannot seek any further early release of superannuation in 2019–20 on the grounds that he has been affected by the adverse economic effects of the coronavirus.
However, Ed finds after 1 July 2020 that his hours continue to be reduced by more than 20 per cent compared to the average of his hours in the last six months of 2019. Ed decides to make a second application and self-certifies through myGov that he is eligible for early release. He is able to apply again for a release of up to $10,000 of his superannuation. Ed submits a second application for the full amount of $10,000 this time.
For each application, the ATO approves Ed’s early release and notifies both him and his superannuation fund. Ed has received a total of $18,000 of his superannuation in two separate payments. He will not be taxed on this amount and is free to spend this money on anything he chooses, or save it for future expenses. He is also free to recontribute any unused amounts to his superannuation in the future (within his contribution caps).
Rachel the sole trader
Rachel is a sole trader with a catering business. At the end of July 2020, Rachel seeks to apply for an early release from her superannuation for the 2020–21 financial year.
Due to the economic effects of the coronavirus, Rachel’s turnover for July is $5,000 compared to $10,000 on average per month for the second half of 2019. Rachel therefore determines that her turnover has reduced by more than 20 per cent compared to her average turnover over the last six months of 2019.
Rachel self-certifies that she is eligible for early release and applies to have $10,000 released from her superannuation.
Watch out for scams
The Australian Competition and Consumer Commission (ACCC) has warned about companies that are cold-calling people claiming to be from organisations that can help you get early access to your funds.
“For most people, outside of their home, superannuation is their greatest asset and you can’t be too careful about protecting it,” says ACCC Deputy Chair Delia Rickard. “The Australian Tax Office is coordinating the early release of super through its MyGov website and there is no need to involve a third party or pay a fee to get access under this scheme.”
Eva Scheerlinck, CEO of AIST (Australian Institute of Superannuation Trustees) said everybody needed to be on their guard if they receive unsolicited calls about their superannuation.
“Unfortunately, as we’ve seen before with any early release super measure, there are unscrupulous operators who take advantage of people in financial hardship either through outright fraud in an attempt to steal their super or by offering unnecessary services for which a fee is charged.” Ms Scheerlinck said.
In most cases the scammers try to obtain personal information to help them fraudulently access the victim’s superannuation funds. In 2019, Australians lost more than $6 million to super scams with people aged 45-54 losing the most amount of money.
“While older people are more commonly affected by superannuation scammers, the new early-access scheme means a range of age groups are now experiencing these scams,” says Ms Rickard.
“Be wary of callers who claim to be from a government authority asking about your super. Hang up and call the organisation directly by doing an independent search for their contact details,” Ms Rickard warns.
Any suspicious behaviour relating to superannuation can be reported to Australian Securities & Investments Commission (ASIC) through its online complaint form.
There have also been moves to make it easier for Australians to get assistance from accountants and financial planners in making financial decisions in the face of the COVID-19 pandemic.
On 14 April ASIC announced that Registered Tax Agents (RTAs) can now temporarily give advice about early access to superannuation without holding an Australian Financial Services License (AFSL) and financial planners will have access to simplified advice documents in the place of a long and complex statement of advice.
Simon Grant from Chartered Accountants ANZ said “As trusted advisers, accountants are well-placed to provide individuals with advice and many already have an existing relationship with their accountant. This is therefore an excellent extension for clients.”