Covid-19 Early Release of Super – What you need to know

As you might be aware the Australian Government has issued a new condition of release for superannuation to assist those affected by Covid-19.    The rules around superannuation are complex at the best of times, and when the government is making policy on the run it can be hard for people to keep up.

The ‘social rules’ that we live by have changed, and so to have the rules for accessing your superannuation.  In normal circumstances it is difficult to get access to your superannuation money until you retire, however, we are not living in ‘normal’ times.

So, what are the new rules and how do they work?

What You Need to Know | Haile Financial | Professional Advice You Can Trust

What are the new rules?

Due to the current outbreak of the corona virus we now have a new condition under which eligible people may access some of their superannuation early “Covid-19 (novel coronavirus) – early release of superannuation”.

The Australian government is allowing eligible individuals to access up to $10,000 of their superannuation in the current financial year, and an additional $10,000 in next financial year.

In Australia the financial year runs from 1st July to 30th June.  This means there is one payment before the 30th June 2020 and another after the 1st of July 2020.

Am I eligible?

For Australian Citizens or Permanent Residents of Australia and New Zealand, there are 3 criteria for eligibility;

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

What evidence do I need?

The Australian Taxation Office (ATO) guidance states that “you will not need to attach evidence to support your application, however, you should keep records and documents to confirm your eligibility” and notes that they may ask for this information.

It is important to note that there are penalties for making false or misleading statements.

How do I apply?

Applications will open on 20th April 2020 and these are completed through MyGov and applications will be processed by the ATO.  You are able to register your interest now by logging into your MyGov account.

Once you have applied and this has been processed, you will receive a letter of approval (or rejection) into your MyGov Inbox.  You won’t need to contact the ATO or your superfund, the payment will be processed to you automatically.

If your fund is a SMSF the process is different, so please talk to your adviser or accountant in relation to this.

Be ‘Super’ Careful.  In times of crisis, there are always those that will try to take advantage, there is only one way to apply to access your super early, that is through MyGov, don’t fall victim to anything else.

What if I don’t have a MyGov account?

If you don’t have a MyGov account currently, you will need to set one up and link the ATO to it.

You can set up an account at www.my.gov.au

To link the ATO to your account, you will need your Tax File Number and two other forms of ATO paperwork, such as a notice of assessment or a PAYG summary, click this link for more information.  https://community.ato.gov.au/t5/Tax/Linking-your-myGov-account-to-the-ATO/ta-p/21622

What if I’m not eligible?

If you are not eligible under the new ‘condition of release’ there are a number of other conditions that you may satisfy.  These include, but aren’t limited to compassionate grounds, severe financial hardship and terminal medical condition.

Each of these comes with its own rules and limits, the following link outlines all the conditions available for early access to your superannuation.

https://www.ato.gov.au/Individuals/Super/Withdrawing-and-using-your-super/Early-access-to-your-super/

Professional Advice – Be ‘Super’ Careful

There can be consequences to withdrawing funds from your super accounts not least of which is that by making a withdrawal you will reduce the balance of your superannuation at retirement.

Withdrawing money from your superannuation whilst investment markets are in turmoil will mean that you may be ‘cashing in’ assets at reduced values and this will affect the ability of your superannuation balance to return to its pre-Covid-19 balance, and to grow in the future.

Another consequence could be the loss of insurance benefits.  Withdrawing funds from your super, may mean that there is not enough money in your account to pay your insurance premiums, or your balance may fall below the minimum required in order to keep your insurance.

Once it is cancelled insurance can often be difficult to get back.  If you have to re-apply, you may incur higher premiums or even exclusions on your insurance.

I cannot stress enough how important it is to seek professional advice before you consider withdrawing funds from your superannuation account.

The rules around superannuation are complex and the consequences of getting it wrong are high.  It is more important than ever to seek professional advice before you take action.

For advice that you can trust, email me and say Hi, and we’ll take it from there.