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.
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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:
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.
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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:
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.”