Coronavirus early access to super: Are you eligible, and should you do it?
If you've lost work or been made redundant due to coronavirus you could be eligible to access up to $20,000 from your super tax free, but should you?
Australian workers and sole traders who've lost part or all of their income due to the ongoing coronavirus pandemic could be eligible to access up to $20,000 from their superannuation early. This includes up to $10,000 this financial year and another $10,000 next financial year.
This comes as small businesses all over the country have been forced to temporarily or permanently close down in light of increasing social distancing measures. In particular, businesses in the tourism, hospitality and events sectors have been among the worst affected in the early stages of the pandemic.
The government announced this initiative today as part of a second multi-million dollar stimulus package worth $66 billion designed to support workers, businesses and Australians already receiving benefit payments.
Who can access their super early due to Coronavirus?
This initiative is intended for Australians who are either already unemployed and struggling to find work, or have recently lost a job or income as a direct result of the coronavirus pandemic.
You need to meet at least one of the following eligibility criteria to access your super early as part of this scheme:
- You're unemployed
- You're eligible to get a job seeker benefit, youth allowance for jobseekers, parenting payment or farm household allowance
- You've been made redundant or had your working hours reduced by 20% or more since 1 January 2020
- You're a sole trader and you've had to pause your business operations, or your turnover has fallen by 20% or more, since 1 January 2020
How much of your super can you access and how do you apply?
If you're eligible, this package allows you to access up to $20,000 from your super. You can access $10,000 from your super between 20 April and 1 July 2020. You'll also be able to access an additional $10,000 after 1 July 2020 until 24 September.
To do this you need to log into your MyGov account online and complete the application form to determine your eligibility. The ATO will assess your application and, if you're eligible, the ATO will advise your super fund that it can release that money to you.
Should I access my super early, and what other options do I have?
Accessing your super early as part of this scheme is completely voluntary, and you're not forced to do it unless you feel it's necessary. If you're in severe financial hardship, accessing a small part of your super now could help you stay on top of your bills and repayments. The fact it's tax free is also a benefit. And, if you don't end up needing all the money you can add it back into your super via a voluntary contribution at any time.
However, there are a few implications of accessing your super early that you need to keep in mind. Firstly, your superannuation is there to help fund your retirement and by accessing some of it now, you're taking that money (and more) away from your future self. The money in your super benefits from compounded investment returns over the long term. That $10,000 today could be worth several times that by the time you retire. If you're in your 20s, it could be worth $100,000 by retirement.
CEO of The Australian Institute of Superannuation Trustees Eva Scheerlinck fears that accessing super now will have a bigger impact on someones retirement than they may realise. "Accessing super when markets are low will crystallise losses and represents minimal short-term gain with a significant long-term cost."
Super funds have fallen this quarter because of the huge losses we're seeing in the stock market. However, these losses are 'on paper' at this stage, and only realised when you sell. Anyone planning to switch their super investment options or withdraw some of their super now is locking in that loss of capital. Plus, by taking that money out of your super now, you also risk missing out on the potential market rebound that could see the money grow well over $10,000.
If you're struggling financially because of the coronavirus pandemic but you don't want to withdraw from your super, there are some other initiatives in place. Check if you're eligible for mortgage repayment support, help with your utility bills, support for casual workers, and see if any of these financial support measures can help.
Other ways to save
Taking money out of your super is a choice that only you can make. If you're unsure about whether this is a good decision for you in the long-run, take a look at some other options which could help you save money.
Managing your daily expenses, as well as looking for ways to save your current bills is a great place to start.
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