From now until 31 December 2020, you may be able to withdraw up to $10,000 from your super under the government’s Coronavirus early release of super scheme. But before you take money from your super, here are five things to consider.
1. How will taking out some of your super now affect your future?
While retirement may be a long way off for you, the amount you have in your super today will have a big impact on your future lifestyle. Your super is a long-term investment. The more you have invested now, the bigger the opportunity for it to grow – both during your work life and once you retire.
While taking out $10,000 may not seem like a big deal now, it could have more of an impact on your future super balance than you realise. You can use the government’s moneysmart super withdrawal estimator to work out how much of an impact it may have on your retirement.
2. Are you eligible?
Not everyone is eligible to access their super early. To take part in the scheme, you must meet at least one of the following criteria1:
- You’re unemployed
- You’re receiving (or are eligible to receive) one of these payments:
- JobSeeker Payment
- Youth Allowance Jobseeker
- Parenting Payment
- Farm Household Allowance
- Special Benefit
- On or after 1 January 2020:
- You were made redundant
- You’re a sole trader and your business was suspended, or your turnover is down at least 20%
- Your work hours were cut by at least 20%
If you apply to withdraw your super and you don’t meet this eligibility criteria, the ATO may investigate your application. This could result in your withdrawal amount being treated as assessable income – or you could face a penalty if you provided false information. You can read more about this on the ATO website.
3. Have you thought about your insurance?
Like many Australians, you probably hold some life insurance through your super. This could include Death cover, which provides a payout if you become terminally ill or pass away, and Total and Permanent Disability (TPD) cover, which provides a payout if you become permanently disabled. Some people also have income protection cover, which pays you a regular income if you’re unable to work due to a temporary illness or injury.
Under recent changes to super laws, if your balance falls under $6,000 you could lose the insurance in your super. So make sure you check whether there will be enough left in your super account to keep your insurance cover if you take out some money early. If you don’t have enough left in your super account, your insurance will be cancelled.
4. Have you thought about other options?
Dipping into your super may not be the only option to help you through this uncertain time. Here are some other ways you can consider to get extra income or temporarily reduce your expenses:
- Depending on your circumstances, you may be eligible for government payments such as JobKeeper, JobSeeker, the fortnightly $550 Coronavirus Supplement, or the one-off $750 Economic Support Payment. You can check if you’re eligible for any of these payments on the government’s treasury website.
- Your state or territory government may offer you a one-off payment or a rebate on your rates.
- Your bank may allow you to temporarily freeze your loan or credit card repayments.
- Many utility providers are providing some flexibility for paying energy or water bills.
- If you’re renting, your real estate agent or your landlord may be able to offer a rent freeze or reduction.
- Consider the redraw facility on your home loan, this could temporarily cover some of your costs.
- It may be a good time to go through your budget to see where you can cut back on expenses until your financial position improves.
5. Do you need to withdraw the whole $10,000?
If you do decide to dip into your super early, think about how much you actually need. You can nominate how much you want to withdraw, up to a maximum of $10,000. If you don’t need the whole amount, you may be better off taking out a smaller amount so you can leave more money invested. That way, it will make less of an impact on your super in the long term.
Before applying to withdraw money from your super, it’s a good idea to check your current super balance. You can do this by logging on to FirstNet or downloading the Colonial First State app.
You can also call us on 13 13 36, 8am to 7pm, Monday to Friday, Sydney time.
Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of super, pension and investment products. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A PDS for Colonial First State’s products are available at colonialfirststate.com.au or by calling us on 13 13 36.