Enabling the early release of funds is a sensible safety net that’s been offered by the Federal Government for anyone in financial hardship right now. But tapping into your super is a decision that needs very careful consideration.
By ATB Partners
New Federal Government economic measures to combat the impact of the coronavirus have allowed unprecedented access to superannuation – up to a maximum of $10,000 for the 19-20 Financial year, and again, if necessary next year. To be eligible, you need to meet the following criteria:
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 2020.
Just remember that all superannuation balances have recently taken a hit, because the markets have suffered significant losses. While it’s not a time to panic, most financial advisors are saying ‘stay the course’ right now, because eventually the market will recover. If you have a small superannuation balance, you could be eroding it substantially.
Let’s look at the numbers. For someone in their mid-30s, $10,000 of super could potentially be worth around $60-65,000 at retirement in 35 years time, based on the average 5.5 percent return of conservative funds for the past 15 years (including the GFC).
Accessing your super is an entirely personal decision, but it’s not one that should be taken lightly, because, after all, the Government is putting sensible measures in place to soften the economic fallout from this current public health crisis. These are unprecedented times, and while $10k might seem like it will help right now, you need to consider the long-term trade-off.
If you find yourself in dire straits financially, look at some of the other welfare payments you could be eligible for, or access the financial hardship services offered by banks and businesses, before tapping into your super. Talk to your financial advisor.
If every option has been exhausted, then accessing your super could be a worthwhile proposition. But remember superannuation has always been intended to fund retirement. And you will need to rely on it when the time comes.
For self-funded retirees and pension recipients there are also some changes at this time:
If you need help figuring out what all this means for you, contact us. We’re here to support you during Covid-19.