Updated: 1st August 2021
- Provisions that allowed early access to superannuation due to COVID-19 have now ended
- The superannuation system does contain more general provisions allowing people to access their superannuation due to severe financial hardship
- Access to your super 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
General severe financial hardship provisions for early access to super
Your superannuation fund may allow you to access some of your super due to severe financial hardship. Generally you will need to meet both of these conditions:
- Receipt of government income support for 26 weeks continuously
- Not able to meet reasonable and immediate family living expenses
The minimum amount you can withdraw is $1,000 and the maximum amount you can withdraw is $10,000 (or your balance if it is less than $10,000). You can only make one withdrawal in any 12 month period.
Withdrawals due to severe financial hardship are taxed as a superannuation lump sum (generally between 17% and 22% if you are less than 60 years of age and 0% if you are more than 60 years of age).
More information on early access to superannuation due to severe financial hardship is available from the Australian Taxation Office and your superannuation fund.
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 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 JobSeeker, COVID-19 Disaster Payment, Pandemic Leave Disaster Payment and mortgage relief and concessions and rebates that might reduce your expenses
- the impact on your retirement savings
Estimating the impact of withdrawing money 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.