The Australian Government’s response to the financial impact of the coronavirus pandemic includes allowing certain individuals to access their superannuation (super) early. Applications opened on 20 April 2020.
Eligible business owners include sole traders, business owners whose business was suspended due to restrictions, or those who have experienced a 20 per cent or greater reduction in turnover as a result of disruption.
Other individuals who can apply for early withdrawal include the unemployed, employees who have had their hours reduced by 20 per cent or more, people who have been made redundant, and people who are eligible for certain benefits including job seeker payments. The super withdrawals will not affect Centrelink or Veteran Affairs payments.
The tax-free super withdrawals are capped at $10,000 for the 2019/20 financial year and a further $10,000 next financial year.
What impact can accessing super early have?
It’s important to understand the effect that accessing your super early can have on your retirement savings, as well as other consequences.
Super is designed to provide people with money for their retirement. Nine and a half per cent of an individual’s salary, plus any voluntary contributions, should be deposited by their employer into an account which is managed by a super fund, or by individuals themselves in the case of self-managed super funds (SMSFs). Self-employed people should also make superannuation payments. The funds contributed to super are invested, and the growth reinvested, to ensure that money accumulates.
To help ensure savings are there to support people through retirement, access to super is usually restricted; an individual must be at least 60 years of age to access their super tax- free.
If you choose to withdraw your super early under the new arrangements, the impact can be:
- Less money available to you in retirement due to the compounding nature of super savings, the further from retirement you are, the greater the impact of withdrawing funds now will be.
- If you have life or income protection insurance through your super, and your balance falls under a certain limit when you withdraw funds, this cover may be cancelled. It is recommended that you check your current super balance before deciding whether to apply for funds.
Why should you apply?
Being able to withdraw up to $20,000 in superannuation savings may help you keep your business going during the COVID-19 restrictions, so it is important to take your individual situation into account.
Any unused amounts can be recontributed to your superannuation fund in the future (within your contribution cap).
How to apply
The Australian Taxation Office is managing all claims for the early release of super through my.gov.au. Eligible people must log in to my.gov.au to apply online. If the ATO approves your application, they will notify your super fund to process your payment.
The first application for up to $10,000 of super can be made between 20 April and 30 June 2020 for the 2019-20 financial year. From 1 July until 24 September 2020, applications can be made to access up to $10,000 more in the 2020-21 year.
For more information about financial support available for businesses during the coronavirus pandemic, see our summary of government and financial support packages.