How to top up your super after withdrawing it during COVID-19

Were you one of the 3.5 million people who made an emergency COVID-19 withdrawal from your superannuation account? If you can afford to, you should consider re-contributing that money.

• When the COVID-19 financial crisis was in full swing, the government introduced special laws to enable you to withdraw up to $20,000 from your superannuation account.
• Most of the people who took up this offer were young and many of them cleaned out their superannuation account.
• If you can afford to, you should consider re-contributing that money to your superannuation account.

The COVID-19 pandemic had a devastating impact on the physical and mental health of millions of Australians. But it also had a huge impact on the superannuation savings of the millions of super fund members who needed to make emergency withdrawals from their superannuation accounts.

Under a government policy measure known as the COVID-19 Early Release of Super, fund members could withdraw up to $20,000 in two parts over two financial years.

The scheme is no longer open but the superannuation regulator APRA said 3.5 million or one-quarter of all fund members withdrew a collective total of $36 billion.
Forty percent of these applications were from people who made two withdrawals, showing how desperate they were to access the money in their superannuation account.

Worse still, figures released by the ATO revealed that while people under age 35 make up just one-third of all superannuation fund members, they made up more than half of all the people who applied for an emergency COVID-19 superannuation withdrawal. Many of these people withdrew almost all their superannuation
savings, taking them back to having no superannuation.

Given that 2020-21 was the best year for superannuation returns in 34 years, these fund members were doubly penalised.

The COVID-19 re-contribution scheme

Recognising that many of the people who made these emergency superannuation withdrawals may now want to catch up to their pre-withdrawal balance, the government introduced a special re-contribution of COVID-19 early release amounts into superannuation measure to help them rebuild their balance.

Under this provision, fund members have until 2030 to put the same amount of money they withdrew from their superannuation fund under the Covid-19 Early Release Scheme back into their superannuation account and it won't count towards their non-concessional contribution cap.

It's, of course, highly unlikely that anyone who made an emergency COVID-19 superannuation withdrawal will now be contributing anywhere near their $120,000 annual non-concessional contribution cap.

Instead, people in that position may be better off re-contributing that money into their superannuation account as a personal voluntary contribution so they can claim it as a tax deduction.