On the 23rd March 2020, the Federal Government announced a $66bn stimulus package, which included allowing early access to superannuation for some Australians.
How much and when can you access your super?
From 20th April, the Government is allowing eligible superannuation members to access up to
- $10,000 from their superannuation by 30 June 2020
- up to $10,000 between 1 July 2020 and 24 September 2020
Any super that is released early will not be taxed and will not affect Centrelink or Veterans’ Affairs payments.
Eligible individuals will need to apply for the release online through the myGov website from 20 April.
If you’re thinking about withdrawing your super, there are several important things you need to consider before making the decision to withdraw.
Who is eligible to access their super?
To be eligible for early release of super, a citizen or permanent resident of Australia and New Zealand must be in one of the following circumstances:
- You are unemployed
- You are eligible to receive one of the following:
- jobseeker payment
- youth allowance for jobseekers (unless you are undertaking full-time study or are a new apprentice)
- parenting payment (which includes the single and partnered payments)
- special benefit
- farm household allowance
- On or after 1 January 2020 either:
- you were made redundant
- your working hours were reduced by 20% or more (including to zero)
- you were a sole trader and your business was suspended or there was a reduction in turnover of 20% or more
Consider the impact on your insurance
You need to consider your superannuation balance to ensure you have enough of a balance left to pay for the insurance premiums that are attached to your superannuation account. Insurances will be cancelled if there is insufficient money in the account to pay the premiums. If your insurance is cancelled, you will need to re-apply for insurance cover, at which time you will need to disclose information about your health, lifestyle, income and occupation. Depending on the information provided, your insurance may be accepted, may be more expensive, or may be declined by the insurer.
The long-term impact on retirement balance
If you withdraw $10,000 or $20,000 from your super, the reduced balance will reduce the compounding returns and this could make a significant difference to your balance when you retire
The exact size of the impact is hard to quantify as it depends on:
- Your age and your spouse’s age
- Whether ‘top-up’ contributions are made down the track to replace this withdrawal
- What your investment earnings are and the compound effect of these earnings over time
- Whether or not your spouse also takes a withdrawal
The potential impact for various aged investors of withdrawing $10,000 this financial year and taking a second withdrawal of $10,000 next financial year is illustrated in the table below.
|Age||Starting balance||Super taken||Difference at retirement|
We’re here to help
It is important to consider your own personal circumstances, the options available to you, and the impact of your actions before making any decisions. For more information on how you may be impacted or for any other financial issues you may want to discuss please do not hesitate to contact us. We’re here to support you during this difficult time.
This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
Lifestyle Financial Services and its advisers are authorised representatives of Fortnum Private Wealth Ltd, ABN 54 139 889 535, AFSL 357306.