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    From the archives

March 25, 2020

What you need to know about early access to your superannuation due to COVID-19

empty supermarket shelf

There’s no doubt things are not right in our world. Following from crippling droughts (still going on for many) and terrifying bushfires (again – still seeing thousands of people rebuilding their lives brick by brick), being slammed by a pandemic has left many of us with a heightened level of stress like we’ve probably never known.

The COVID-19 pandemic has had an unprecedented impact on so many aspects of our lives, including the global economy. In Australia, the shutdown of non-essential services and flow on economic impact has meant hundreds of thousands of Aussies are suddenly out of work and without income, entire industries have collapsed.

Money worries, let alone the thought of facing unemployment for God knows how long is always stressful, coupled the health risk and essentially being able to leave your house it’s totally understandable that we’re feeling at breaking point.

The Government has taken various actions to help the economy splutter along – one of them being the ability to access up to $20, 000 of your super early if you’re facing financial hardship as a result of COVID-19.

Before you run to the ATO to claim your super: a few things to consider

You could access up to $20,000 from your super over the next two financial years if you’ve lost income because of COVID-19. But make sure you’re across the full picture before getting stuck into your retirement fund.

There are a few reasons why you’d want to be incredibly sure it was absolutely necessary (read last resort) before taking your super out early. Because of the way super works its magic, with compound interest at its core, if you take it out now, it means there’s a lot less left to continue to grow and grow. One of the largest super funds, Hostplus, calculated that $20,000 withdrawn by a 25-year-old today would have mushroomed to around $132,000 by a retirement age of 67. So the impacts of taking even a small amount of super out are not to be taken lightly.

Furthermore, you’d be taking out your super at a very low time in the market (in other words, just a month or two ago that $20k in your super was probably worth more like $22-25k or more). Think of it a bit like having to sell your house when the market’s in a slump – it’s just not worth as much and you get a crap price. So it’s not ideal.

BUT, if things have gone to custard then that’s exactly what the Government has recognised and why they’re making it available. If that’s you – here’s what and how you need to go about seeing whether you can access your super, broken down whether you’re 1) if you’re eligible, 2) how to access it and 3) when you can access it (timing):

Eligibility

There are several criteria to be able to access it (such as being unemployed, on a job seeker payment, or were made redundant). You can check out the full list here.

BONUS FACT: you will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

How to apply

If you’re meet the access requirements, you then apply directly to the ATO – and can do that through the through the myGov website. You don’t apply through your super fund!

Once your application has been assessed and processed by the ATO you will be informed of whether you were successful or not for early release. Then the ATO will provide a copy of this result to your superannuation fund (which is the trigger for them to release your super payment). The super fund will then make the payment to you.

TIP –  while you don’t need to contact your super fund to access the payment, you may want to think about contacting your fund to check that they have your correct details, including your current bank account details and proof of identity documents so it can be as fast and seamless for you as possible.

Timing

Applications should be able to commence from mid-April 2020. The full $20,000 payment is broken down over two financial years, accessing up to  $10,000 before the end of June 2020 (the current financial year) and another 10,000 after July 2020 – when the next financial year starts. So you don’t get a $20,000 lump sum and presumably you need to go through the process twice to receive the full amount.

Finally

Whether you need to get early access to your super or not, the good news is Longevity will be here to help those of you who have had to perhaps access your super earlier due to hardship, or for those of you who need to just need to build up your nest egg after taking a bit of a hit.

Further links and resources

Thanks to Mamamia (@mamamiaus) for this handy list of support services if you need to talk about anything that’s going on for you:

Other links to related fact sheets and articles:

Treasury official announcement re early access to super: https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet-Early_Access_to_Super_1.pdf

https://www.savings.com.au/savings-accounts/should-you-withdraw-from-your-superannuation-during-covid-19

https://www.theguardian.com/australia-news/2020/mar/23/early-access-to-superannuation-over-coronavirus-should-be-last-resort-advocates

https://www.abc.net.au/news/2020-03-23/australians-should-not-dip-into-super-coronavirus/12080208

Thsi information is general in nature and has been prepared without taking into account your financial objectives, situation or needs. Before making a decision in relation to your super you speak to a licensed financial professional and consider if the information is appropriate to you.