Are you in trouble? HUNDREDS of Australians are being investigated for wrongly dipping into their superannuation to cope with the coronavirus crisis
- Government’s early access superannuation scheme extended until December 31
- 800,000 Aussies have made repeat transactions of up to $10,000 since April
- Treasury predicts $41.9billion will be pulled out of workers’ accounts early
- ATO is investigating workers for dipping into their funds for wrong reasons
Hundreds of workers will be investigated for allegedly dipping into their superannuation funds for the wrong reasons with almost $42billion being pulled out of the scheme early.
Cash-strapped Australians have been given the chance to withdraw up to $20,000 from their retirement savings if they found themselves in financial hardship as a result of the coronavirus pandemic.
But some have been using the cash to pay down mortgages or even put deposits on a home, prompting fears young workers will face a financial crisis in their retirement.
Cash-strapped Australians have been given the chance to withdraw up to $20,000 from their retirement savings (pictured, queues at a Centrelink in Brisbane during the crisis)
Some workers have been using the cash to pay down mortgages or put deposits on a home
About 10 per cent of customers are now up to $25,000 ahead on their mortgages, one lender told the Sydney Morning Herald.
The Australian Tax Office admitted on Thursday not a single eligibility check has been done since the scheme was launched.
Tax Office second commissioner Jeremy Hirschhorn told a senate committee the ATO has been working on the assumption Australians are honest.
He said a program is now being set up to check if people are ineligible to use the scheme.
Anyone found ineligible could face fines up to $12,600, and they can also be taxed on the withdrawn amount.
Treasury predicts $41.9 billion will be pulled out of workers’ accounts early during the coronavirus pandemic, far higher than initial estimate of $29.5 billion
WHO CAN ACCESS COVID-19 EARLY RELEASE OF SUPER
Citizens and permanent residents
Citizens and permanent residents are able to apply to access up to: $10,000 of their super until June 30 and a further $10,000 from July 2020 1 until 24 September 2020.
Applicants must satisfy one or more criteria:
- You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance.
- On or after 1 January 2020, either: you were made redundant, your working hours were reduced by 20% or more, your business was suspended or there was a reduction in your turnover of 20% or more.
SOURCE: AUSTRALIAN TAX OFFICE
To be eligible, people must have been made redundant, become unemployed, had their hours reduced or be on JobSeeker, Youth Allowance or Parenting Payment.
More than 2.6 million people have used the early release program, which allows people in hardship to access $10,000 at a time over two rounds.
The Treasury predicted $41.9billion will be pulled out of workers’ accounts early during the coronavirus pandemic, far higher than initial estimate of $29.5billion.
Industry Super Australia chair Greg Combet said 560,000 people had completely cleaned out their accounts, with 460,000 under the age of 35.
‘That’s simply creating a big problem for them down the road in retirement and also for taxpayers. It just pushes people back on to the pension,’ he told the ABC.
He said industry super funds would oppose any move to extend the early release scheme beyond December.
Labor’s financial services spokesman Stephen Jones slammed the government’s handling of the scheme.
He said it was ‘extraordinary’ it had taken the ATO this long to address the issues with the scheme.
‘If people have been accessing this scheme outside the eligibility process, there are consequences for that.
‘That should have been pointed out from the beginning – $12,600 in fines and a hefty tax bill, it’s not good enough.’
Prime Minister Scott Morrison said he would not lecture people on how to spend the savings they withdrew.
‘Superannuation doesn’t belong to the superannuation fund managers. It belongs to the superannuation fund members.’
Pros and cons of early super access
- Dipping from your superannuation can provide support if you urgently need financial assistance as a result of the coronavirus crisis
- Money accessed through this scheme is tax-free
- Money accessed now may be more valuable now than in your retirement
- Depending on your age, withdrawing money now could see you miss out on more than double that amount by the time you retire as money taken out won’t deliver compound interest
- A 25-year-old taking out $10,000 now could have $49,000 less in retirement, a 35-year-old could lose up to $34,000 and a 45-year-old up to $23,000.
- Withdrawing money will likely see you cash out near the bottom of the market
- The issue is even more problematic for women, who on average retire with 40 per cent less super than men
- If you withdraw your full super balance or do not have enough left to pay for premiums, it can affect your life, total permanent disability or income protection insurance