Thousands of Australians could be in for a windfall after applying to withdraw up to $20,000 from their superannuation accounts early under new laws.
As part of the government’s coronavirus rescue package, workers are able to access their supers to help them stay afloat during the economic downturn.
Experts fear the total drawn from the nest egg pots could eventually top $50 billion, while the government estimated a more modest $27 billion.
It could be good news for savers, particularly those who have lost work due to the restrictions imposed to protect the public from the COVID-19 pandemic.
But it may also put pressure on small funds with limited cash, forcing them to sale assets.
People are seen waiting in line at the Centrelink office in Palm Beach on March 23 (pictured) as many Australians feel the pinch of the COVID-19 economic downturn
In the first week of the new scheme, around 600,000 people expressed their interest in drawing thousands from their accounts.
Ordinarily, strict rules block people from accessing their superannuation until they hit retirement age of between 55 and 60.
However, people who withdraw now would not only lose this money from their retirement funds, they would redeem it at a time when share markets have plunged, forcing them to sell at a loss.
According to an industry memo seen by The Australian, the Australian Taxation office was contacted by 617,800 workers who registered interest to withdraw up to $10,000 before July.
WHO CAN ACCESS THEIR SUPER EARLY?
If you choose to withdraw from your superannuation early, you must meet certain criteria.
If successful, you can access up to $10,000 of your superannuation in 2019-20 and a further $10,000 in 2020-21.
You must meet one of these requirements:
– You are unemployed
– You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment, special benefit or farm household allowance
– If on or after January 1 2020: you were made redundant
– If on or after January 1 2020 your working hours were reduced by 20 per cent or more
– If you are a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more
They would then look to withdraw up to a further $10,000 between July and October.
The government predicted that 1.3 million people would ask for early access to their pots, but this could easily be eclipsed – as the scheme has already been inundated.
Known as an early drawdown scheme, it will be running from April 20, but people are allowed to express an interest now.
‘In terms of the number of people registering, this should be used as a high level indicator of volumes of those who may eventually apply for early release of their super only,’ the ATO said.
Prime Minister Scott Morrison announced the measures as part of a second stimulus package on March 22, surprising the superannuation industry by allowing people to access their super early.
Treasurer Josh Frydenberg said workers and sole traders could withdraw the money if the number of hours worked or their income fell by 20 per cent or more due to the coronavirus.
The early release also applies to welfare recipients who qualify for the coronavirus supplement.
Details of the requirements you must meet to access your superannuation early are at the Treasury website here.
French nationals queue to enter Sydney airport to be repatriated back to France on April 2 (pictured) amid the COVID-19 pandemic.
Known as an early drawdown scheme, it will be running from April 20, but people are allowed to express an interest now, giving them access to up to $20,000 from their super accounts
HOW DO I DO IT?
If you are eligible, you can apply directly to the ATO through the myGov website: www.my.gov.au.
You will need to certify that you meet the above eligibility criteria.
After the ATO has processed your application, they will issue you with a determination.
The ATO will also provide a copy of this determination to your superannuation fund, which will advise them to release your superannuation payment.
Your fund will then make the payment to you, without you needing to apply to them directly.
However, to ensure you receive your payment as soon as possible, you should contact your fund to check that they have your correct details, including your current bank account details and proof of identity documents.
This initiative builds on existing provisions that allow early access to super in the event of hardship or on compassionate grounds, and it is estimated to put up to $27 billion dollars of superannuation back into the pockets of hardworking Australians,’ the Treasurer.
But it may not be the best time for all Australians, as the accounts are likely to have dropped in value.
Share markets have dropped more than 30 per cent since February and destroyed trillions of dollars worth of value worldwide.
Opposition Leader Anthony Albanese told Sky News it wasn’t the best time to withdraw money from superannuation.
‘Superannuation is one of the things that’s a ballast for our economy, it provides us stability, and what I wouldn’t want us to see is either people essentially missing out on a large part of their retirement incomes or for the super industry as well,’ Mr Albanese said.
‘Now’s not the time to be selling those assets.’
Mr Albanese warned of potential fire-sales if the big super funds started selling assets.
Australians had $3 trillion in superannuation as of December of which $1.9 trillion had been invested in various instruments, the Association of Superannuation Funds of Australia said on its website.
Of that $1.9 trillion, 51.4 per cent was invested in equities both Australian, international and unlisted.
The remainder was in fixed income, cash, property and infrastructure.
WHERE TO GO FOR HELP
* Tax relief: if you have a debt to the tax office you can’t pay call the Australian Tax Office emergency support infoline on 1800 806 218
* Unexpected bills for essentials: don’t go to high-interest payday lenders. No-interest and low-interest loans of up to $3000 available from Good Shepherd Microfinance.
* Utility providers will negotiate a payment plan to keep the power, water and gas on – ring them
* Banks will make hardship provisions available if you are having trouble paying your mortgage – call your lender
* Set up a myGov account at my.gov.au so you can access welfare help online
* Go to Services Australia and use the payment and service finder to work out what help you can get
* Access up to $10,000 of superannuation early this financial year, see here
* The first $750 coronavirus supplement will go to those registered as on income support and eligible between 12 March and 13 April. The second $750 payment will go to those eligible and registered on 10 July. Check here
* The new coronavirus supplement of $550 per fortnight is being added to several welfare payments – check if you are eligible here
* A list of Services Australia phone numbers for different information lines from crisis payments to low income health care cards is here
* Visit the Services Australia and register for a Jobseeker Payment or call to register on 132 850
* Centrelink advance payments are available in some circumstances
* You can get rent assistance from Services Australia if you are on a JobSeeker payment.
* National Debt Hotline for free advice and support for those in financial difficulty 1800 007 007
* Ask your employer to register on the ATO website ato.gov.au to keep your job going during the coronavirus shutdown so you can get $1500/fortnight