Super is your money. The coronavirus crisis and the economic lockdown it triggered has cost tens of thousands of Australian workers their jobs and caused tens of thousands more to suffer pay cuts or reduced working hours.
This is causing financial hardship for some people. To help them through this period the Commonwealth Government has changed the superannuation laws regarding fund members being allowed early access to their super. They passed special laws to let fund members withdraw up to $10,000 this financial year followed by up to another $10,000 next financial year.
To be eligible to do this you must:
If you meet these requirements and are granted access to your superannuation, you won't pay any tax on it and the payments you receive will not affect any Centrelink or Veteran Affairs benefits you may also be receiving. However, if you later wish to put that money back into your superannuation account be careful to not go above your contribution cap limits.
How to apply
If you believe you are eligible you need to apply online through mygov.au.
But should you do it?
If you desperately need money and you have no other options, yes.
But you should first consider all your other options such as:
Will accessing your super early impact your superannuation?
Yes. Superannuation is a long-term investment. If you access it early you will reduce your long-run retirement savings because there will be less money in your account earning compound concessionally taxed investment income. This doesn't mean you shouldn't access your superannuation now, but at least understand the implications.
If you are aged 20 and take out about $5000, assuming you have that much in your account, you will effectively clean out your superannuation and have to start again from scratch. You will most likely lose the insurance cover you have through your super fund and probably end up with $30,000 less by the time you retire at age 65. This will be about 8% less than what it would have been otherwise.
Table: Cost to your superannuation savings at age 65 if you access your superannuation early
|Savings foregone if you access up to|
|Age||Average balance||$10,000||Percent forgone||$20,000||Percent foregone|
If you are aged 30 and take out about $10,000 you will probably end up with $40,000 less by the time you retire at age 65, which is about 12% less than what it would have been otherwise.
If you take out another $10,000 next financial year you will end up with about $79,000 less overall, which is about 24% less than it would have been otherwise.
If you are aged 40 and take out about $10,000 you will probably end up with $27,000 less by the time you retire at age 65, which is about 9% less than it would have been otherwise.
If you take out another $10,000 next financial year you will end up with about $53,000 less, which is about 18% less overall than it would have been otherwise.
If you are aged 50 and take out about $10,000 you will probably end up with $18,000 less by the time you retire at age 65, which is about 8% less than it would have been otherwise.
If you take out another $10,000 next financial year you will end up with about $36,000 less, which is about 15% less than it would have been otherwise.
These figures show us that accessing your superannuation early has the most impact on people aged around 30. It has less impact on younger people aged in their 20s because they have less money in their superannuation - you can't take out $10,000 unless you have that much in your account to begin with.
The older you are the lesser the impact because you have fewer years to wait until you retire, plus you are taking out a smaller share of your account balance anyway.
The following graph illustrates how this works if you are 30 years old and access up to $10,000 now and a further $10,000 next year.
|Should I see a financial adviser?||Super and the coronavirus crisis|