In response, the Australian Government has introduced a raft of economic stimulus packages, including allowing limited access to your superannuation fund.
So, what does this look like for you? And are you eligible?
What are you entitled to?
Typically, super remains untouched until retirement. However, the Federal Government has recognised that accessing some of your super now, may help individuals and families during this challenging time.
From 1 July 2020 until 31 December 2020, if you’re an eligible citizen or permanent resident of Australia or New Zealand, you can access up to $10,000 of your superannuation.
This early release of super applies to the 2020-21 financial year and is tax-free.
Are you eligible?
There are some strict rules on eligibility. There are also strict penalties for misleading claims. So, make sure you understand the criteria.
To be eligible to apply for an early release of your super, you must meet one or more of the following criteria:
- you are unemployed
- you are eligible to receive one of the following
- JobSeeker Payment
- Youth Allowance for job seekers (unless you are undertaking full-time study or are a new apprentice)
- Parenting Payment (which includes the single and partnered payments)
- Special Benefit
- Farm Household Allowance
- on or after 1 January 2020 either
- you were made redundant
- your working hours were reduced by 20 per cent or more (including to zero)
- you were a sole trader and your business was suspended or there was a reduction in turnover of 20 per cent or more (partners in a partnership are not eligible unless the partner satisfies any other of the eligibility).
What does the application process involve?
Once you’ve ensured you’re eligible, you can turn your attention to applying. This is done through the Australian Tax Office’s (ATO) at myGov portal.
Applications opened on 1 July 2020 and will close on 31 December 2020.
Make sure your information is accurate before you submit your application. You’ll need to ensure the amount of super you request is available within your fund and the payment, be sent to the correct bank account. You’re unable to cancel an application once submitted.
Further information regarding eligibility and application help can be found on the ATO website.
Are there implications to withdrawing your super early?
An early release of superannuation will offer many people across Australia a financial boost at an unprecedented and difficult time. However, it is not without long-term risks.
While withdrawing your super will assist you in the short term, your financial future may be compromised. When it comes time to retire, you will have a lower balance in your super. You may also miss out on compounding interest which can add up substantially.
There is no hard and fast answer. Eligible individuals will need to weigh up what will suit them best both now and in their futures.
A financial counsellor or financial adviser may be able to help you with your decision.
Be mindful of the insurance attached to your super account – you may lose it.
Withdrawing super may come with other risks too.
Most super funds offer life insurance. You may lose your insurance if you apply to withdraw the full balance from your super account. The account will be closed, and the insurance attached to your account will be cancelled.
If you apply to withdraw less than the full amount but have insufficient funds to pay your insurance premium, your insurance cover will also be cancelled. This will result in you no longer being able to make a claim from the date your insurance is cancelled.
If your super account goes below $6,000 and you would like to keep your insurance, you will need to contact your super fund to ensure you can continue to be covered.
So, it’s vital you assess your insurance needs before you apply for an early super release.
What will happen next?
The ATO will process your application. They’ll then issue you with a determination. And that’s it. If successful, your super fund will make the payment to you.
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