Should you access your super early if you’re on JobKeeper?

A 23-year-old waitress out of work since March and on JobKeeper says she’s “struggling” and may be forced to withdraw her super.

Welcome to Sisters In Law, news.com.au’s weekly column solving all of your legal problems. This week, our resident lawyers and real-life sisters Alison and Jillian Barrett from Maurice Blackburn tackle your legal rights when it comes to accessing your superannuation early.

QUESTION: I’m a 23-year-old waitress and I haven’t been able to work since March as the restaurant I worked at has closed down. I’m on JobKeeper but I’m struggling financially. I live in a share house in Melbourne and my rent, food and car payments have left me with next to nothing to live on each week. I want to access my super contributions but how does it work? How do I prove I’m financially insecure? Also, what will the long-term impact for me be if I access my super now? I don’t want to leave myself destitute in the future. I keep hearing conflicting opinions on what’s best to do, my mum says it’s a terrible idea, so would love some advice. – Katie, Victoria

ANSWER: We’ve spoken with many people in the same situation as you Katie and, as there are a lot of different opinions out there, we can understand why it’s difficult to know what to do and what your rights are.

The government has allowed people who meet certain criteria to access their super early, with two early releases permitted, each up to $10,000. Applications for the first early release closed on June 30, 2020, and applications for the second close on December 31, 2020.

To be eligible you must be a citizen or permanent resident of Australia, and require the early release of super to help you deal with the adverse economic effects of COVID-19. In addition, you must be unemployed, or eligible to receive one of the following:

· JobSeeker payment

· Youth allowance for jobseekers

· Parenting payment (including single and partnered payments)

· Special benefits, or

· Farm household allowance

You can also apply for early release under the new provisions if you can show that on or after January 1, 2020, you were either made redundant or had your working hours reduced by at least 20 per cent. People who are sole traders are eligible too if their business was suspended or there was a reduction in turnover of 20 per cent or more.

These are strict criteria, with a potential penalty of more than $12,000 if you seek early access to your super and you’re ineligible.

If you are eligible, you will be able to apply through the MyGov website to access up to $10,000.

You aren’t required to provide evidence to support your application, but you should keep records and documents to prove your eligibility if you’re asked. Some evidence you may need includes:

· Pay slips

· Rosters or letters from your employer

· Bank statements

· Separation certificate

· Documents confirming your government payment outlined above.

We suspect your mum thinks dipping into your super is a terrible idea because she’s worried about your long-term financial health.

Accessing your super early should only be done as a last resort because the impact on your retirement account balance and on your insurance can be far more significant than you might expect, particularly if you’ve already withdrawn up to $10,000 in the first phase of scheme.

While accessing a quick lump sum right now might seem appealing, it’s important to remember that your superannuation is your retirement savings. Particularly for younger workers, such as yourself, a small withdrawal now may have a very significant impact on your eventual retirement income.

Industry Super Australia has calculated that a 30-year-old withdrawing $20,000 over the next year could lose out on $100,000 at retirement.

You may not be aware that you have death and total and permanent disability insurance in your super and you may also have income protection insurance cover. If you withdraw your super and there’s not enough money left to pay premiums, then your insurance will stop.

Find out what insurance cover you have, and if you want to retain your insurance find out how much money you need to consider leaving in your account to pay the ongoing premiums.

Sadly, we’ve had reports of real estate agents or landlords pressuring tenants in financial hardship to make an early draw down on their super to cover their rent before they’ll be shown any leniency. ASIC has issued a warning to the real estate industry that such conduct could lead to jail time and fines.

You should explore all options, such as asking for rent relief, or speaking with your car loan provider about reducing your repayments, before drawing on your super.

The Federal Government is also encouraging Victorians like yourself who are relying on JobKeeper payments to also apply for JobSeeker to “top up” their income once the JobKeeper subsidy is reduced from late September.

The decision to make early withdrawal of super funds should not be taken lightly and should only be done as a last resort, after obtaining proper financial advice to help manage the immediate and longer-term financial impacts.

This legal information is general in nature and should not be regarded as specific legal advice or relied upon. Persons requiring particular legal advice should consult a solicitor.

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