Call to let ATO handle early release of super cash
The Actuaries Institute has backed ASFA’s calls to have the ATO make the early release super payments directly to individuals.
The federal government is coming under increasing pressure to allow the Australian Tax Office to handle early release super payments amid estimates that it could see a $25bn outflow from super funds over the next few months.
The Actuaries Institute on Thursday backed calls by the Association of Superannuation Funds of Australia to have the ATO make the early release super payments directly to individuals and then bill super funds at a later date — possibly over a period of time to relieve pressure on the funds.
The convener of the superannuation practice committee of the institute, Tim Jenkins, said the short-term demand from super fund members for early access to their money would be more than $25bn if 1.35 million members applie d to access the full $20,000 from their accounts.
The institute has called on the government to allow the ATO, which has to make a determination on whether a super fund member is entitled to an early release of money, to handle the direct payments to individuals.
“There may be a need for the funds and the government to look at ways to enable early access and smooth out the ability and capacity of funds to pay,” Mr Jenkins said. “A possible solution is for the ATO, in addition to making a determination, to distribute payments (to individuals) to further streamline the process to get the money into the hands of those in need quickly,” he said.
“The ATO could then invoice the super funds over the following few months to spread the cash flow impact on funds.”
The industry is concerned that the announcement that members can withdraw as much as $20,000 from their super over the next few months will see funds forced to cope with the sudden outflow of billions from May, while also having to cope with a heavy administrative burden of dealing with hundreds of thousands of withdrawal applications by fund members.
The industry is in talks with the government on the issue.
The chief executive of the institute, Elayne Grace, said the government had to make difficult financial decisions to balance the short-term health and economic risks to the community against the long-term impact on retirement incomes.
“Early access to super will help ameliorate some of the short-term pressure people, their families and their communities face,” she said.
But this raised key issues including the liquidity for super funds and the potential to lock in losses on the balances of super fund members who cash out from their funds at the bottom of the market.
There were also concerns fund members might have their insurance cut off if their super balances fell to zero as a result of the withdrawals.
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