Coronavirus Stimulus Package - Early Access to Super
As part of Government efforts to cushion the blow individuals may feel throughout these challenging times, the Government has made significant changes to the existing early access rules to superannuation. In summary, eligible people could access up to $20,000 of their superannuation balance if impacted by the effects of the Coronavirus.
How does it work:-
To access your superannuation, you must first meet the eligibility requirements which includes;
Losing your job
Having significant reduction in working hours;
Having significant reduction in revenue due to the impacts of Coronavirus
All applications must be made via online through myGov. The ATO administers this process.
Once approved by the ATO, you'll receive a letter, which will also be sent to your superannuation fund.
Funds will then be released(tax free) by your superannuation fund.
When can I access super?
You'll be able to access up to $10,000 tax free by June 30 2020.
After which, you may access up to a further $10,000 from 1 July 2020 - 24 September 2020.
On 21 July 2020, the government made an announcement , proposing to extending this access to 31 December 2020. Do note that this is yet to be legislated.
How does this impact me?
Superannuation is a vehicle for long-term investing with tax concessions. The sole purpose of this, is to provide you with a comfortable retirement income. However, we understand the reason the government has done this to support people in dire need today. Accessing super - especially by young working Australians - must be the last resort for most people as it has more significant implications down the track.
For example, a 30 year old worker, has about 35 more years of working life before retirement. If we use a total return of 5% pa, withdrawing $20,000 from your super today will have such a person forgo a potential total return of $62,765, in today's dollars, by the time they're 65. Assuming CPI of 2.5% and no superannuation taxes have been applied.
We haven't even factored in market movements especially in today's markets. If you don't have enough funds in cash, you'll have to sell down your investments to free up cash. This will mean that you'll crystallise any losses made and those losses will be gone forever.
So, we encourage everyone to reach out to discuss this before making an application to access super. Let's look at other ways we can assist and if we can't and must access super, we'll definitely help you to do so.