Early superannuation access applicants urged to spend money wisely
More than 1.6 million have accessed their superannuation savings early, but they are being urged to spend it cautiously.
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Paying for everyday expenses, clearing debt and buying essential items are some of the popular ways cash-strapped Australians are spending their superannuation savings.
Under the Federal Government’s early access to super scheme, 1.61 million people have accessed more than $13.2 billion in their retirement kitties and the average amount withdrawn is $8165.
Freelance graphic designer Nicole Thompson, 35, said she “agonised” over whether accessing her super early was the right thing to do but said she had little other option to ease her financial pain during the COVID-19 pandemic.
She was also determined not to fall behind on paying off debt, which was accumulated 18 months ago when she became chronically ill.
“My monthly income has dropped by at least half in April and I’m on JobKeeper as well,” Ms Thompson said.
“I’ve used the super money to pay off a $6000 credit card debt, I bought a new computer for $2200 because my whole job depends on it and I got a new desk.
“It was so important to me to pay off the debt this year and it helped relieve stress as I was losing more and more income. This will save me a lot in credit card interest.”
Ms Thompson said she did not plan to access another $10,000 in the new financial year despite still carrying another $5000 in credit card debt.
Applicants accessing super early must be either unemployed, eligible for JobSeeker or this year were made redundant or had a drop to their working hours or salary by 20 per cent or more.
They can access $10,000 this financial year and another $10,000 next financial year up until September 24 tax free.
Crown Money Management chief executive officer Scott Parry said he had a lot of clients who had accessed the money but they planned to use it cautiously.
“Many have grabbed the money and put it into their mortgages to create more of a buffer for rainy days ahead,” he said.
“A lot of people are a bit jaded by super and think it can help today rather than waiting until they are 65.”
Financial adviser Scott Haywood said early access to super should only be used for essential expenses.
“This includes to pay for transport to earn an income, gas, water, electricity, rates and the mortgage,” he said.
“People who take the first bite of the cake and take $10,000 now will take another bite in July or August. It won’t be isolated.”
The Australian Taxation Office has urged applicants to be honest when applying for early access.
They will be reviewing applications and where they have concerns the claim was not made genuinely, penalties of up to $12,600 may apply.
Originally published as Early superannuation access applicants urged to spend money wisely