Cash grab as 600,000 Australians register with ATO to drawdown coronavirus funds from superannuation

The rush to grab superannuation cash is a sign the scheme could dramatically eclipse government forecasts.

The early drawdown scheme won’t be operational until April 20, but Australians will be able to draw down up to $10,000 before the end of June and a further $10,000 between the start of July and late September.

More than 600,000 Australians have rushed the Australian Taxation Office registering their interest in drawing down as much as $20,000 from their superannuation funds in the first week applications were open, in a sign the scheme could dramatically eclipse government forecasts.

According to an industry memo circulated by the government revenue agency on Thursday evening, a total 617,800 workers had put their name down to access up to $10,000 from their nest eggs before July, and up to a further $10,000 between July and October.

That figure, which is current up until the end of Wednesday 8 April, is almost double the 361,000 registered super members that the ATO logged over the three days from Tuesday to Thursday last week, as revealed by The Australian on Monday.

The government is expecting about 1.3 million savers in total to ask for early access to their nest eggs, but this estimate could soon be eclipsed as the scheme has already been inundated with almost 50 per cent of its forecast applications.

The early drawdown scheme won’t be operational until April 20, but Australians will be able to draw down up to $10,000 before the end of June and a further $10,000 between the start of July and late September.

The ATO will contract those who have registered their interest when the application form is complete.

“In terms of the number of people registering, this should be used as a high level indicator of volumes of those who may eventually apply for early release of their super only,” the ATO said. “Registration of interest does not mean an individual will later complete the application process.”

While the government reckons about $27bn will be drawn down under the scheme, the $3 trillion superannuation sector fears the total could be north of $50bn, which would pressure some smaller cash-starved funds to engage in a fire sale of assets — further lowering the value of already depressed asset values — or liquidate out of positions in long-term positions in infrastructure or property holdings.

Australian Institution of Superannuation Trustees head of advocacy Melissa Birks said the figures were “in line with industry expectations” of a total drawdown that would double the government’s expectation.

“Particularly given the broad eligibility criteria of the measures and the number of Australians who are doing it tough financially,” Ms Birks told The Australian.

“We hope that as the JobKeeper Payments kick in, that these early release measures are increasingly viewed in the context of them being a last resort measure,” she said.

“The industry has been busy preparing to ensure that the new early release measures are smoothly implemented and paid as quickly as possible into members’ bank accounts once applications have been approved by the ATO,” Ms Birks said.

Some smaller union-and-employer-backed industry funds, which cater specifically to members in the shuttered retail, hospitality, tourism and entertainment sectors, are facing a triple-whammy cashflow strain as asset values tank, contributions stall as workers are laid off, and now as they stare down a potential tsunami of hardship withdrawals.

Some parts of the funds management sector have lobbied the government to allow the Reserve Bank to supply extra liquidity to the sector as super funds strain under the pressure of investment markets crumbling, their cohorts switch out of diversified investment strategies and into safer cash investments, longer-term investments in unlisted assets such as infrastructure return less.