Coronavirus means you can access your super. But should you?

New Federal Government economic measures have allowed unprecedented access to superannuation as the nation deals with the outbreak of Coronavirus.$10k sounds tempting. Should you take it?

By Julie Nipperess

In the latest economic stimulus or ‘safety’ package announced by the Federal Government, there’s a provision for anyone in financial duress to access their superannuation. Up to a maximum of $10,000 for the 19-20 Financial year, and again, if necessary next year.

SU - Accessing your super

Accessing your super

To be eligible, you need to meet the following criteria:

  • you are unemployed; or
  • 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; or
  • on or after 1 January 2020: you were made redundant; or your working hours were reduced by 20 per cent or more; or if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.

People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.

To release your super, you need to apply via MyGov by the end of the financial year – June 30.

SU - Don’t make a rash decision

Don’t make a rash decision

And of course, for low-income earners or anyone relatively new to the workforce who has not amassed savings they can dip into, it’s a sensible safety net.

But there are some essential things to think about before you rush in and withdraw the cash.

For someone in their mid-30s, $10,000 of super could potentially be worth around $60-65,000 at retirement age, based on the average 5.5 percent return of conservative funds for the past 15 years (including the GFC).

In a higher-risk-higher-return portfolio rate, which many younger people tend to have, that figure is likely to be more than $100,000, when you consider compound interest.

It’s also important to remember that all super balances have recently taken a hit, because the markets have suffered losses. If you have a small balance, you could be eroding it substantially by taking out $10k.

And, as I’ve said before, when the market recovers, your superannuation will, too.

These are certainly unprecedented times, but there are a number of protections in place to soften the economic fallout from Coronavirus, for example: the official interest rate has again been lowered.

SU - Explore all of your options

Explore all of your options

Many of the welfare payments you can access as a result of job loss, or loss of income, are not going to be assets tested, and waiting periods will be waived. These are definitely worth exploring.

Banks and other financial institutions have financial hardship services you can access if you’re really in dire straits with mortgage repayments or credit cards.

If you have exhausted every option, then consider tapping into your superannuation.

But just remember – superannuation is designed to fund your retirement, and all decisions you make with regard to it should have that sole focus in mind. You will need it. And the more superannuation you have, the more comfortable you will be when you retire.

If you’re considering accessing your superannuation, get professional advice. Every situation is different, and this is a decision that you shouldn’t make lightly.

Self-funded retirees

For self-funded retirees and pension recipients there are also some changes at this time.
Currently, retirees are required to draw down a minimum of 4 percent a year from their superannuation, a number that increases as they age. The government is halving this requirement to 2 per cent for this year and for next year, to give retirees more discretion over the management of their assets.

If you need help deciding whether to access your super, or to understand what other options you have, please contact us.

This is general advice and should not be treated as personal advice. Julie Nipperess is an authorised representative of Step Up Financial Group Pty Ltd ASFL No: 512509.

Need more information? Get in touch with Step Up Financial

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      Orange, NSW 2800

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      Orange, NSW 2800

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