- People suffering the economic impacts of Coronavirus can apply to have up to $20,000 released from their superannuation fund on compassionate grounds. A withdrawal of up to $10,000 can be made in each of the 2019/20 and 2020/21 financial years
- Applications for the fist withdrawal had to made by 30 June 2020 and can be made between 1 July 2020 and 24 September 2020 for the second withdrawal
- To be eligible you must be unemployed, eligible for the JobSeeker Payment, Youth Allowance for JobSeekers, Parenting Payment, Special Benefit or the Farm Household Allowance. Alternatively, on or after 1 January 2020 you must have been made redundant or had your working hours reduced by 20 hours or more. If you are a sole trader your business must have been suspended or had a reduction in turnover of 20 percent or more
- To make a withdrawal you must apply to the ATO through the myGov website. Applications will be possible from mid-April 2020
- Access to $20,000 could be a lifeline, but it will reduce your retirement savings. How much it reduces them by depends on a number of things – mainly how old you are, when you retire, what investment options you have selected and of course what investment returns you earn between now and when you retire. It’s a complicated thing to try and estimate
- If you want an estimate of the possible impact on your retirement savings you can use the Plan For Retirement feature in the MoneyBrilliant app. Register at moneybrilliant.com.au or download the app from the App Store or the Play Store
- Be wary of people telling you to make these withdrawals – only a licensed financial adviser can give you advice on this
- Don’t forget there are other things you can do – you may qualify for income assistance, you may be able to pause mortgage and loan repayments, you may be able to negotiate rent relief with your landlord and you may be able to access concessions on other major household bills
- If you are considering making one of these withdrawals you should discuss it with your financial adviser or your superannuation fund before doing it
Economic impact of Coronavirus is now compassionate grounds for early access to Superannuation
The Government has introduced legislation to allow the economic impact of Coronavirus to be considered “compassionate grounds” for early access to Superannuation. Each person will be able to make two withdrawals of up to $10,000 each. One withdrawal had to be made in the 2019/20 financial year and another one can be made in the 2020/21 financial year.
It is now too late to apply for a withdrawal in the 2019/20 financial year. Applications for the 2020/21 financial year must be made between 1 July 2020 and 24 September 2020.
Amounts withdrawn from superannuation under these provisions will be tax-free and will not affect Centrelink or Veterans Affairs payments.
Applications for early withdrawal must be made to the Australian Taxation Office through the myGov website from mid-April 2020. You can already register your interest in making a withdrawal on the myGov website.
To apply, a person must satisfy one of the following requirements about their employment or business status:
At the time they apply they are:
- unemployed, or
- eligible to receive the JobSeeker Payment, Youth Allowance for JobSeekers, Parenting Payment or Special Benefit, or
- eligible to receive the Farm Household Allowance
Or, on or after 1 January 2020 the person:
- was made redundant, or
- their working hours were reduced by 20 per cent or more, or
- if the person is a sole trader their business was suspended or there was a reduction in their turnover of 20 per cent or more
It is expected that people will “self assess” their eligibility to make an application to the ATO.
The impact on your retirement savings
Obviously if you have lost your job or your income has fallen significantly due to COVID-19 being able to access up to $20,000 from your superannuation may be a critical lifeline. In making the decision to do it you need to consider a number of things including:
- your current financial position – including current income, expenses and debt
- other options that might be available to you – including government benefits such as JobKeeper, JobSeeker and the Coronavirus Supplement, mortgage relief and concessions and rebates that might reduce your expenses
- the impact on your retirement savings
Estimating the impact of withdrawing up to $20,000 from your superannuation is difficult and depends on a number of things including:
- your current age and when you plan to retire – the money you withdraw now will grow over time – the longer the time the greater the amount
- the investment options you select for your fund – different investment options will generate different returns on the money
- actual investment returns over the time between now and when you retire and withdraw the money
You can use the Plan For Retirement feature in the MoneyBrilliant app to estimate the impact of making a withdrawal from your superannuation. Just sign up or download the MoneyBrilliant app, connect your super account and answer some questions about your age, retirement age, salary, contributions and investment options. You can estimate your retirement savings with and without the withdrawals and compare the difference. You can see more about the Plan For Retirement feature in MoneyBrilliant in this short video.
Be wary of organisations or people encouraging you to make an early withdrawal from your superannuation. Only a licensed financial adviser can make a recommendation to do this. You should also be wary of scams that involve superannuation. It is probably best to deal only with your financial adviser or directly with the ATO and your fund.
If you are thinking of making an early withdrawal from your superannuation fund we suggest you contact your financial adviser or your fund to discuss your options.
If you are concerned about the financial impact of COVID-19 or you are facing the uncertainty of losing your job or having your income significantly reduced we can help. Sign up to MoneyBrilliant and we will give you access to a host of tools and features to help you organise your finances and make better decisions about your money. We’ll also give you tailored insights about the financial assistance available from governments and businesses to help you face the economic and financial challenges caused by the COVID-19 pandemic.
This summary has been prepared by MoneyBrilliant Pty Ltd (ABN 34 153 932 766, AFSL 492711, ACL 493068). The information in this summary is of a factual nature only. We are not suggesting or recommending that you take any particular course of action in relation to any financial product or service. It does not take into account your personal circumstances or objectives. If you need financial advice or taxation advice you should seek advice from a licensed financial adviser or tax agent. You may also be able to access additional information from the websites of the Australian Securities and Investment Commission (ASIC) and the relevant product providers.