Why cash-strapped Australians need to take action if they want to access their superannuation early
The countdown is on for Australians to access their superannuation early if they are still struggling financially. This is how you do it.
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There’s three months left for Aussies to dip into their retirement savings but there are some long-term issues to consider.
Experts are warning those who are considering taking out money before the scheme wraps at the end of the year to only do it as a last resort.
The Federal Government’s early release of superannuation schemes has been rolled out during the pandemic to help those struggling financially and has so far resulted in more than 2.87 individuals withdrawing $35.6 billion.
The average amount withdrawn per person is $12,400.
The scheme enabled eligible applicants – those who have lost their jobs or suffered significant hits during the pandemic – to withdraw $10,000 tax-free last financial year and another $10,000 through until December 31.
Here’s the advice from experts:
LOOK AT OTHER INCOME OPTIONS
The Australian Institute of Superannuation Trustees chief executive officer Eva Scheerlinck says they have seen a “tapering off in applications” because many people drained their accounts after the first round of the scheme.
“We know that there are people suffering financial hardship, but unfortunately the scheme is not without a long-term impact for the individuals who access it,” she says.
“We urge those suffering financial hardship to explore all avenues of income support and carefully weigh up their options before tapping into their super savings, which should be a last resort.”
According to the Australian Securities and Investments Commission’s MoneySmart calculator for a 30-year who withdraws $10,000 now it would end up costing $21,516 come retirement at 67. This is calculated in today’s dollars.
DON”T WITHDRAW THE FULL $10K
Sunsuper’s executive general manager of customer engagement Stevhan Davidson says for those still planning to access their super early they do not have to withdraw the full $10,000, they can withdraw less than this and minimise the damage to their retirement savings.
“You also need to look really closely at the eligibility criteria even if you’ve previously withdrawn, as the ATO are cracking down on people withdrawing who don’t meet the criteria,” he says.
KEEP AN EYE ON STOCKMARKET
The sharemarket has fallen during the pandemic and Davidson says taking money out now simply locks in losses that have hit super balances.
“History tells us that all market downturns are temporary even if they are severe in the short-term,” Davidson says.
“Locking in or crystallising a loss by withdrawing your super after markets have gone down also means you will miss out on the eventual market rebound.”
Despite some Australians accessing their money that have been ineligible the Australian Taxation Office has failed to take any action.
At the Senate Select Committee on COVID-19 last month, the ATO revealed between two and four per cent of applicants who accessed their super early were not eligible.
HOW TO ACCESS SUPER EARLY
• Check your super balance online to check your have sufficient funds.
• Make sure you are eligible. This includes being made redundant in 2020, receiving Jobseeker or you’ve had your working hours reduced by 20 per cent or more.
• Ensure your bank details, which the ATO & your super fund have, are up to date.
• Visit the MyGov website, then click on the ATO portal.
• Click on the COVID-19 measures.
• Go to the early release of superannuation and click on ‘apply’.
• An outcome letter will be sent to your myGov inbox and you may also receive an SMS notification.
• Once approved it will takes about three business days to process.