Australians wanting early access to superannuation due to financial hardship caused by COVID-19 have lodged more than 760,000 applications, worth over $6 billion in total, with the Australian Tax Office (ATO).
The decision to allow temporary early access to superannuation was part of the Federal Government’s second stage of its COVID-19 economic support package. Under the plan, eligible individuals can access up to $10,000 of their superannuation in the 2019-20 financial year and a further $10,000 in 2020-21.
An ATO spokesperson said applications for early release of superannuation for people financially affected by COVID-19 opened on 20 April 2020.
“As announced by Treasury Deputy Secretary, Jenny Wilkinson at the Senate Select Committee on COVID-19 on 28 April 2020, we have received 762,000 applications for early release of superannuation, with 757,000 of these applications approved by the ATO. The total amount that has been approved for release is $6.3 billion.”
The Association of Superannuation Funds of Australia estimates that the average withdrawal is around $8,200. This is less than the maximum amount of $10,000 as a substantial number of applicants have less than $10,000 in their superannuation account (or are withdrawing from more than one superannuation account). Some applicants also are withdrawing only what they need rather than the maximum amount.
“There are a number of financial assistance options to help people through these tough times. Super will be the right option for some, but you should be looking at what else is available and possible cuts to discretionary spending before raiding the cookie jar,” SCA director Xavier O’Halloran said.
SCA modelling found that, for a 30-year-old, the impact of withdrawing $20,000 would be $49,823 by retirement age.
“Taking out money before retirement means losing the benefit of compound interest over a lifetime. Depending on how old you are, withdrawing money now could see you having to work much longer to make up the difference before you retire,” Mr O’Halloran said.
Be wary of superannuation scams
The Australian Competition and Consumer Commission (ACCC) is also warning Australians to be mindful of superannuation scams.
An ACCC spokesperson said since the Federal Government’s early-release announcement on 22 March, to 30 April, Scamwatch has received over 400 reports of superannuation scams relating to COVID-19, with over $12,000 in reported losses.
ACCC deputy chair Delia Rickard warned scammers are cold calling people claiming to be from organisations that can help people get early access to their super.
“The ATO is coordinating the early release of super through myGov and there is no need to involve a third party or pay a fee to get access under this scheme,” Ms Rickard said.
“Never follow a hyperlink to reach the myGov website. Instead, you should always type the full name of the website into your browser yourself.”
In most cases, the scammers are seeking to obtain personal information, including details that will help them fraudulently access the victim’s superannuation funds.
In 2019, Australians lost over $6 million to superannuation scams, with people aged 45-54 years losing the most amount of money.