In response to the significant impact and financial stress caused by the COVID-19 pandemic, the government has recently announced changes to accessing superannuation.
What do these changes mean?
- If you are experiencing financial stress because of COVID-19, you can access a portion of your superannuation account balance early (before retirement).
How do I know if I can apply?
You can apply if:
- You are unemployed;
- You can receive or are receiving one of the following government allowances:
- Job Seeker payment
- Youth allowance for jobseekers
- Parenting payment
- Special benefits
- You were made redundant or your working hours were reduced by 20% on or after 1 January 2020; and
- You are a sole trader whose business has been suspended or your profit was reduced by at least 20%.
How much can I withdraw?
- You can withdraw up to $10,000.00 before 1 July 2020, and up to a further $10,000.00 between 1 July 2020 – 24 September 2020.
How can I withdraw the money?
- Applications for early release will be accepted through the myGov website from 20 April 2020.
- You can register your interest prior to this date by logging into your myGov account and following the ‘Intention To Access Coronavirus Support’ instructions.
- The ATO will then process your application and then your nominated superannuation fund will explain how to complete the process and what further information is required.
Will I be taxed on this withdrawal?
- No, you will not need to pay tax on the amount released.
Will my Centrelink or Veterans’ Affairs payments be affected?
- No, if you are receiving Centrelink or Veterans’ Affairs payments, these will not be impacted by early withdrawal from your superannuation account.
Under what other circumstances can I access my superannuation early?
- Compassionate grounds;
- Severe financial hardship;
- Terminal medical condition;
- Temporary incapacity;
- Permanent incapacity; and
- Account balance has fallen under $200.00.
What are the disadvantages of making this withdrawal?
- If you are receiving workers’ compensation weekly payments, withdrawing part of your superannuation account balance early may preclude you from receiving these payments for a number of weeks.
- Generally, if your withdrawal relates to ceasing work due to injury, your weekly payments may be suspended however, a withdrawal relating to financial hardship may not impact on these payments.
- It is important to speak to your specific workers’ compensation case manager before deciding to access your superannuation account balance early.
Superannuation associated insurance – Total and Permanent Disablement, Death or Income Protection
- If you do not receive any superannuation contributions from your employer for 16 months or your account balance falls below $6,000.00, the default insurance entitlements attached to your superannuation account may be cancelled.
- If a withdrawal from your superannuation account causes your balance to fall below $6,000.00 and there is not enough money in the account to cover the premiums, the insurance will stop.
- This may vary between superannuation funds, so it is important to seek advice specific to your superannuation fund and policy.
- You will be left with less retirement savings.
Who else should I talk to about this?
- The Australian Taxation Office for more information about this policy and early release of superannuation under particular circumstances;
- A financial advisor before you make this withdrawal;
- A representative from your superannuation fund to find out what insurance cover you have, and how much money needs to remain in your account so you can keep paying the premiums; or
- Your workers’ compensation case manager to determine whether a withdrawal under this policy will impact your weekly payments.
* This piece was written by Aphroditi Bakopanos, Lawyer in the Zaparas Lawyers Superannuation team.