Australians exceed expectations by accessing more than $29 billion in superannuation early

The amount of superannuation withdrawn under the Federal Government’s early access scheme has already exceeded forecasts with another 10 weeks left for people to access their money.

A surge in cash-strapped people rushing to access their superannuation early has exceeded the Federal Government’s forecast of $29 billion.

Latest Australian Taxation Office has revealed more than 2.54 million people have withdrawn $29.3 billion under the early access to super scheme.

The government predicted 2.2 million people would access $29 billion during the scheme’s tenure.

The scheme started in April and with another 10 weeks to go it’s expected to grow by billions more as many rush to access a further $10,000 tax free this financial year through until September 24.

Federal Treasurer Josh Frydenberg has previously said the $3 trillion super pot is “the people’s money” and they should access it if they needed to in order to cope financially.

Australian Treasurer Josh Frydenberg said superannuation is “the people’s money” and they could access it if they hit tough financial times during the pandemic.

But Industry Super Australia’s chief executive officer Bernie Dean criticised the government’s estimates and said they were “underdone”.

“That so many young Australians have accessed their super savings in the middle of their working life is a tragedy waiting to happen,” he said.

“It comes at a steep price to your retirement nest egg – with the lost interest often three or four times the amount you take out.”

Mr Dean said for those rushing to withdraw their money they should only do it as a last resort and should not be used “to blow on race six or a tummy tuck.”

The Association of Superannuation Funds of Australia’s chief executive officer Dr Martin Fahy said these were “anxious times” for many Australians under extreme financial pressure.

“It’s important to think very carefully before compromising your private retirement savings and to access financial support from the Federal Government as a first priority,” he said.

“It’s clear that without superannuation, the great bulk of Australian workers would not have any significant financial assets they could draw upon in this time of economic adversity”.

However for those withdrawing their money early after hitting financially tough times during the pandemic, latest figures from the Australian Securities and Investments Commission’s MoneySmart calculator found based on an annual income of $50,000, with inflation factored in and investment returns of 7.5 per cent, withdrawing $20,000 now would end up costing in today’s dollars:

• A 25-year-old $47,400 come the retirement age of 67;

• A 35-year old $38,800;

• A 45-year-old $31,600;

• A 55-year-old $25,700.

Canberra artist Lisa Cahill has withdrawn $10,000 from her superannuation is considering withdrawing another $10,000. Picture: Sean Davey

Artist Lisa Cahill, 45, is among the millions of Australians who has already withdrawn $10,000 from her super account and is considering taking out another $10,000 this financial year.

The mother-of-one has suffered a 95 per cent hit to her income since March and after finding it difficult to get repayments holidays on two mortgages she said she was left with no other option but to withdraw $10,000 from her super.

“As an artist my business income always fluctuates but the uncertainty of how long the downturn would last made me anxious,” said Ms Cahill.

“I couldn’t get through to any of the banks so I withdrew my super. I understand it’s going to affect me long term so what was I supposed to do.”

Here’s three important things to consider when accessing super early.

1) ELIGIBILITY

The Australian Taxation Office’s assistant commissioner Sonia Corsini said anyone applying for $10,000 this financial year has until September 24 to do so.

“It’s really important you meet the criteria and only apply if you meet it,” she said.

“If you’re not sure ask your tax professional or financial adviser for advice about eligibility and whether accessing your super is the right decision for you.”

The criteria includes being made redundant or suffering a significant hit to your income this year. Australians citizens and permanent residents of Australia or New Zealand can apply to access up to $10,000 from their super until September 24.

Temporary residents cannot apply in this second tranche.

2) BE PATIENT

Since the second tranche opened up the Australian Taxation Office has been inundated with applications. Ms Corsini urged people to take care when lodging an application and be patient.

“It’s a busy time but we are working as hard as we can to process applications quickly and we know the funds are processing payments as quickly as they can,” she said.

The entire process from start to finish can take up to nine business days. This includes four days for the ATO to process the application and then up to five for the fund to review the application before giving the green light.

3) SPEND IT WISELY

Financial comparison website Mozo’s spokesman Tom Godfrey urged those who do dip into their super to be careful how they spend their money.

“If you’ve taken money out of your super, it’s important to use it wisely,” he said. “Consider putting the money in a savings account so it’s earning some interest and you can still access it to cover unavoidable household expenses such as electricity, gas, internet and food.”

Mr Godfrey also said recipients should consider paying down long-term debt.

• Visit the myGov website and click on the ATO portal.

• Click on the early release of superannuation apply tab.

• Only apply once.

• You do not need to attach evidence but keep relevant documents handy.

@sophieelsworth