Early access to your super due to financial hardship

What's changing?

In March the Government announced a package of measures to provide financial assistance to Australians affected by COVID-19. This included temporary early access to superannuation.

The rules mean people who are eligible were able to apply to access $10,000 from their super fund between 20 April and 30 June 2020 and a further $10,000 between 1 July and 24 September 2020. If you do access these funds, you won’t need to pay tax on this money or declare it in your tax return.

With many people feeling uncertain right now, it can be tempting to draw on your super as a safety net. But withdrawing money from your super account before you retire can mean you have much less to live on in retirement. So before taking any action, make some time to understand how this could impact your financial future.

For more information about Government COVID-19 related support measures visit ato.gov.au/coronavirus

Early access to superannuation is one of the measures the Federal Government has introduced to help people who have been financially affected by the COVID-19 pandemic.

The rules mean people who are eligible will be able to apply to access $10,000 from their super fund between now and 30 June 2020 and a further $10,000 between 1 July and 24 September 2020. If you do access these funds, you won’t need to pay tax on this money or declare it in your tax return.

With many people feeling uncertain right now, it can be tempting to draw on your super as a safety net. But withdrawing money from your super account before you retire can mean you have much less to live on when you leave work for the last time. So before taking any action, make some time to understand how this could impact your financial future.

1. Am I allowed to access my super early?

The first step is to understand whether you are eligible to access your super early. If you are an Australian and New Zealand citizen or permanent resident, to be eligible you must meet one or more of the eligibility conditions, including where you are: 

  • Unemployed
  • Eligible to receive, or receiving, the following types of payments:
    • JobSeeker, or
    • youth allowance for Job Seekers, or
    • parenting payment, including single and partnered payments, or
    • farm household allowance or special benefit.

You can check the full eligibility criteria here.

There are other criteria that determine whether you qualify - you may be able to access your super early if:

  • you were made redundant on or after 1 January 2020, 
  • your working hours have dropped by 20 per cent or more since 1 January 2020.
  • you’re a sole trader and your business turnover has dropped by 20 per cent or more, or if your operations have been suspended.

Some temporary residents can also access $10,000 from their super up to 30 June 2020 only. You may be in this category if you’ve held a student visa for more than 12 months and you can’t pay for your living expenses. Skilled workers on a temporary visa who are still employed but can’t pay for their daily living requirements may also be eligible.

The ATO will take action if you cannot provide proof of eligibility

It’s important that you assess your eligibility accurately and honestly.

The intent of the measure is to support people who are adversely financially affected by COVID-19 and need help to meet expenses.

If the ATO find that you have applied for COVID-19 early release of super when you do not qualify, or mainly for the purpose of obtaining a tax benefit, they will consider taking action.

You must keep your own records that demonstrate your eligibility. 

You could face penalties of more than $12,000 for making a misleading statement, including falsely declaring that you are eligible to receive an early release payment from your super. 

If you are unable to demonstrate your eligibility when the ATO request evidence, any amounts paid to you under early release of super will form part of your income tax return, and you will pay tax on the released amount.

It’s also important to note that recontributing amounts withdrawn from your super early can result in a range of tax outcomes and implications. You should consider seeking financial advice before making contributions to super.

Read more about the ATO’s compliance approach on early release of super payments.

2. Do you understand the consequences for your long-term retirement savings?

Taking money out of your super fund now may mean you retire with a much smaller super balance down the track. That’s because the power of compound returns means the more you have in your super fund and the longer you leave it there, the more you will have later in life.

Also be aware that scammers have been pretending to be from the ATO and super funds, offering fund members access to their retirement savings. These criminals are stealing personal information and super money. Contact the ATO if you are concerned you have been targeted by a scammer.

3. Have you considered other support available?

It’s important to consider all your options before deciding to draw on your super, including the full range of measures the Federal Government and banks have announced to assist people who are suffering financial hardship as a result of the pandemic. These include:

  • JobKeeper: a payment of $1500 a fortnight before tax, which is a wage subsidy for eligible employees that can be accessed by eligible employers that generally have been affected by the pandemic1.
  • Coronavirus supplement: an extra $550 a fortnight for people who are already receiving certain types of income support2.
  • Deferral of mortgage and other loan payments for a period of six months3.

Make sure you have explored all these initiatives before you decide to access your super.

https://www.business.gov.au/Risk-management/Emergency-management/Coronavirus-information-and-support-for-business/JobKeeper-Payment-for-employers-and-employees
https://​www.ato.gov.au/​General/​JobKeeper-Payment/​Employers/​Your-eligible-employees/
3 By contacting your bank and making an application for assistance as a result of the pandemic

4. Do you really need the money?

It’s natural to feel concerned about cash flow now, but it’s even more important to think through whether you really need the money before you decide to take cash out of your super fund.

There may be other sources you could use before accessing your super money, including dipping into your savings or other investments.

It’s important to consider these avenues as many people’s super balances have dropped due to recent share market falls. Keeping more money in your super means that you have more available to invest for your financial future for the long term.

5. What will it mean for my insurance cover?

Many people hold income protection and life and total permanent disability insurance policies inside their super funds. Depending on the balance of your superannuation account, withdrawing money early can affect your insurance cover and in some cases, cancel it completely.

Your insurance policies may be cancelled if you withdraw funds from your super that results in the balance dropping to zero or less than the next premium amount, or if your balance is below $6,000. New rules also mean your insurance policies may be cancelled if you don’t contribute to your super fund for 16 months.

Therefore it’s important to think through the likely effects of withdrawing funds from your super that potentially affect the currency of your insurance policies. Your insurance may support your expenses should you be faced with an unfortunate incident like a serious illness or accident down the track that affects your ability to work.

Accessing your super may be the right choice if you need this money to pay for your day-to-day living expenses and you have no other options for generating income at this time.

But it’s essential to weigh up the advantages and drawbacks of all your options before you decide to apply for this money to be released. It’s also a good idea to talk to a financial adviser and ensure your choice is the right one for your circumstances.

References:

https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/early-access-to-your-super/
https://​www.servicesaustralia.gov.au/​individuals/​services/​centrelink/​coronavirus-supplement
https://​treasury.gov.au/​coronavirus/​jobkeeper

What you need to know

  • If you’re eligible, you will be able to access up to a maximum of $10,000 of your super in the 2019/20 financial year and another $10,000 in the 2020/21 financial year. You can only make one application per financial year for any amount up to $10,000.

  • Before applying, make time to understand how an early withdrawal could impact your financial future. Read the five things to consider before accessing superannuation early.

  • You can apply for early access from 20 April 2020 up to and including 24 September 2020.

  • Temporary residents can only access up to a maximum of $10,000 in the 2019/20 financial year, for applications made up to and including 30 June 2020.

  • You apply online directly through myGov.

  • You cannot apply directly to BT.

  • When you submit the application, the Australian Taxation Office (ATO) will request that you nominate a super fund account(s) and your preferred bank details for the payment.

  • The ATO will consider each application and advise if it is approved or declined.

  • If the application is approved, the ATO will provide a copy of the determination to your super fund(s) who will make the payment to you from your super account to the bank account you nominated as part of the application to the ATO.

  • Early access payments are tax free.

  • Early access payments won’t affect Centrelink or Veterans’ Affairs payments.

What if I don't have $10,000 in one super fund?

If you are eligible to access your super early and your balance is less than $10,000, we will be able to release the super amount available in your account (up to $10,000).

Note: If you have multiple super accounts you will be able to specify in your application a withdrawal amount from each account, up to the maximum amount of $10,000 in total.

For example: John has $8,000 in Super fund A and has $4,000 in Super fund B.  If John applies to the ATO to withdraw $10,000, John will be able to access $8,000 from Super fund A and $2,000 from Super fund B, or any other combination from the two funds up to a maximum of $10,000 in total. Note, that the request to access both accounts need to be in a single application.

What happens to the insurance in my super?

Following the release of your early access super funds, if you have funds in your account remaining, any existing insurance cover you may have will not be impacted provided the account balance remaining is sufficient to continue paying the insurance premiums.

However, if you withdraw your total super balance, any insurance cover you have may be cancelled.

Find out more about changes to insurance within super for low balance accounts.

Who is eligible?

To apply for early release if you are an Australian or New Zealand citizen or permanent resident, you must satisfy any one or more of the following requirements at the time of application:

  • You are unemployed; or 

  • You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (including single and partnered payments), special benefit or farm household allowance; or

  • On or after 1 January 2020, either:

    • you were made redundant; or 
    • your working hours were reduced by 20% or more; or 
    • if you are a sole trader - your business was suspended or there was a reduction in turnover of 20% or more.

Please note that the ATO will be taking action where people deliberately exploit the system. Read the ATO’s recent media release about compliance when applying in situations where you are not eligible and/or withdrawing and recontributing to your super to claim a tax deduction.

Read the media release on the ATO website

I am a temporary resident. Can I access my super early?

If you are a temporary resident, to apply for early release you must satisfy any one or more of the following requirements:

  • You hold a student visa which you have held for 12 months or more and you are unable to meet immediate living expenses.

  • You are a temporary skilled work visa holder, your working hours have reduced to zero, and you remain engaged with your employer.

  • You are a temporary resident visa holder (excluding student or skilled worker visas) and you cannot meet immediate living expenses.

Note: Temporary residents can only access up to a maximum of $10,000 in the 2019/20 financial year, for applications made up to and including 30 June 2020. Temporary residents are not able to make an application for the 2020/21 financial year.

I have an SMSF. Can I access my super early?

If you are an SMSF member, you will need to meet the same eligibility requirements as listed above and will also need to make your application directly through myGov.

The ATO will then issue the SMSF trustee with a determination advising them of their eligibility to release an amount. Once the determination is received, they will be authorised to make the payment to your nominated bank account.

For more information visit the ATO COVID-19 SMSF page.

How to apply

You can apply for early access from 20 April 2020 up to and including 24 September 2020.

You apply online directly through myGov. You cannot apply directly to BT.

If you have already applied, read frequently asked questions from our members.

We're here to help

For more information about early access to super, visit the ATO page: https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/early-access-to-your-super/

If you have any questions, speak to your financial adviser, call our Customer Relations team on 132 135 from 8:30am to 5:30pm (Sydney time) Monday to Friday, or contact us any time via our online form at bt.com.au/contact-us

Please note we are currently experiencing higher than usual volumes of support requests. We are working hard to answer your calls and emails.

During this changing environment, we know you may be looking for information on how we are managing this event now and in the future.

For up-to-date information about your funds, login to the app, online portal or online banking site relevant to your investment.

Important information

Information is current as at 28 July 2020. The information in this email is factual only and does not constitute financial product advice.

This information does not take into account your personal objectives, financial situation or needs. Before acting on it you should seek financial and taxation advice to determine its appropriateness to your objectives, financial situation and needs. This email provides an overview or summary only and should not be considered a comprehensive statement on any matter or relied upon as such. An investment in a superannuation product offered through BT or Westpac is not a deposit with or any other liability of Westpac Banking Corporation ABN 33 007 457 141 (the Bank) or any other company in the Westpac group. It is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. Neither the Bank nor any other company in the Westpac group has issued, stands behind or otherwise guarantees the capital value or investment performance of any of these superannuation products.