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Superannuation is designed to provide you with savings for when you retire. Even though for some of us retirement might seem like an eternity away, making an early withdrawal from your super may have an immediate financial impact on your current situation.


The Australian Government has increased the eligibility for those who have been impacted by COVID-19 to allow them to withdraw money from their superannuation under ‘hardship provisions’.

This means, that an eligible person can withdraw up to $20,000 ($10,000 before 30 June 2020 and $10,000 in the 2020/21 financial year) to help with their current financial situation. 

And while this may be a good solution for some, it’s important to consider the long-term effects this could potentially have on your retirement plans in the future.


Am I eligible to make a withdrawal under the hardship provisions?

Generally, to access your superannuation under the hardship provisions you need to apply to your superannuation fund by proving that you meet both the below conditions:

  • You have received eligible government income support payments continuously for 26 weeks.
  • You are not able to meet reasonable and immediate family living expenses.

More information on the criteria and circumstances that determine whether you’re eligible to access your super early can be found on the ATO’s website.

To assist those affected by COVID-19, the government has increased the eligibility and to apply for an early release you must satisfy one or more of the following requirements:

  • You are unemployed
  • You are eligible to receive a job seeker payment, youth allowance for job seekers, parenting payment, special benefit or farm household allowance.
  • On or after 1 January 2020, you were either:
    • made redundant
    • had your working hours reduced by 20% or more
    • were a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.

 


What to consider before accessing your superannuation

Superannuation is designed to provide you with savings for when you retire.  Even though for some of us retirement might seem like an eternity away, making an early withdrawal from your super may have an immediate financial impact on your current situation. However, reducing the amount of money invested in your super will have longer lasting effects, and will reduce the potential balance of your super fund when it comes to retirement.

To demonstrate, MoneySmart has developed a calculator to show you the financial impact of withdrawing your superannuation now, depending on your age if you retire at age 67.

Age when withdrawing $20,000

Effect on retirement savings at age 67 in today’s dollars

30

$43,032

40

$35,024

50

$28,506


Source: www.moneysmart.gov.au/covid-19/accessing-your-super

Withdrawing funds in times where there is a high level of volatility creates additional risk as this may crystallise a potential loss due to the down-turn of the market.  This will also have an impact on your superannuation fund’s ability to recover in the future.

It’s important to consider whether you have insurances within your super fund as well. If you do make a withdrawal and your super balance falls below a certain level, you could lose the insurances held within that fund too. Again, this could have a significant long-term effect for you and your family if you were to suffer from an injury or illness.

 


Should I make a withdrawal?

Before deciding under the new hardship eligibility, please speak to your Relationship Manager. We’ll be able to work with you and your personal circumstances to determine if this is the option for you, or if there is other support that will provide you with a better long-term solution.

 

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