With the onset of the Coronavirus pandemic, Prime Minister Scott Morisson earlier announced that Australians could have early access to their superannuation.
Eligible citizens and permanent residents of Australia and New Zealand are eligible for an early release of their super between 1 July 2020 and 24 September 2020 through ATO online services. Applications for the financial year 2019-2020 closed on 30 June 2020.
The Federal Government anticipated that thousands of Australians would be financially impacted by COVID-19. By allowing Aussies to access their super early, they hoped that they would be able to ease some of the burden. Although this scheme has been extremely useful for most citizens and permanent residents, there are potentially a few damaging effects to accessing one’s super early. One of the obvious reasons is that withdrawing your super early will reduce your super amount you may have to retire on. Additionally, it may also affect one’s income protection insurance and life insurance. Hence, it was advised to Australians that it would be appropriate to seek financial advice on this withdrawal before accessing their superannuation early.
It has been estimated that till date millions of Australians have emptied their super accounts as part of the COVID-19 early release scheme. With the government extending this scheme until 31st December 2020, the treasury estimates that Australians will withdraw up to $42 billion from their superannuation accounts.
Statistics show that most Australians working in the hospitality industry have accessed their super early compared to any other industry. Furthermore, citizens and residents aged under 35 seemed to have emptied their accounts as opposed to any other age group. It can also be observed that low income earners and women have been hit hard by this scheme as they were already falling short on their retirement savings and this scheme would simply make it worse for them. But nothing can be done about this shortage in super as for many Australians it is the only way to survive during these uncertain times.
The government plans to borrow money to assist struggling Australians considering global interest rates close to zero. Hence, the COVID-19 early release scheme seems to be an inexpensive income-support scheme for the government whereas an expensive one for individuals, when it should really be the opposite.
Till this date more than $6.3 billion worth of super has been paid to eligible Australians as a result of COVID-19 and a lot more is anticipated to blow out until the end of this year.
References
https://www.ifa.com.au/news/28206-almost-half-a-million-australians-empty-their-retirement-fund
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