If you’re out of work due to COVID-19, can you withdraw funds from your super to make ends meet? It’s a good question, and unfortunately, it’s one more and more people will be considering as the government’s control measures result in job losses across the nation. If you’re considering going down this route, the most important thing is that you seek advice from a financial planner or advisor.
At WKB TPD Lawyers, we understand that many of our clients are particularly vulnerable to the present changing economic and social situation unfolding with COVID-19. We remain very much open and hard at work helping anyone who is unable to return to work because of illness or injury and will continue to fight the good fight for you. Part of that, of course, includes keeping our clients up-to-date with changes to their superannuation.
So, can you access your super early due to COVID-19? If so, how?
Potentially – depending on your circumstances. As per the Federal government’s stimulus package, individuals affected by COVID-19 can access up to $10,000 of their super in the 2019–20 and a further $10,000 in 2020–21.
In order to access your super early, you must apply directly to the ATO through myGov (not your individual super) before 1 July 2020. You can apply for a further amount from 1 July 2020 for approximately three months (though note that the exact timing will depend on the relevant legislation).
Once the ATO has processed your application you will receive a determination, as will your super fund. If your application is successful your fund will then make the payment to you.
Who is an eligible individual?
An eligible individual is someone who:
- Is unemployed; or
- Is eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (this includes the single and partnered payments), special benefit or farm household allowance; or
- On or after January 1, 2020:
- Was made redundant; or
- Had their working hours reduced by 20% or more; or
- Is a sole trader and their business was suspended or there was a reduction in your turnover of 20% or more.
Importantly, if you are accessing early release of your super you will not need to pay tax on amounts released and the money you withdraw will not affect Centrelink or Veterans’ Affair payments.
I’m an eligible individual. Should I access my super early?
That is essentially a judgement call and the answer will depend on your individual circumstances. At WKB TPD Lawyers we insist on seeking proper financial advice around this decision.
How does early access to super impact TPD claims?
For most people insurance is attached to their superannuation account. One of the things this insurance covers is that if you cannot work because of a medical condition, you may receive a TPD lump-sum payout. But if you have insurance in your super and your super account balance is less than $6000, your TPD cover can be cancelled.
Even if withdrawing $10,000 leaves you with over $6000 in your fund, remember that your eligibility for early access to super means that your super will have either no contributions or reduced contributions entering your fund. At the same time, you still have ongoing fees and insurance premiums leaving the fund. If you believe you are at risk of having under $6000 (or approaching under $6000) in your fund we urge you to contact your super provider or a financial advisor as soon as possible.
We understand this is a confusing time for all, but at WKB we are dedicated to providing as much certainty to our clients as we possibly can. If you need any assistance regarding whether you should access your super early, contact WKB Lawyers on 1800 865 225 today.
*The information in this article is not financial nor legal advice. It is essential that you speak to a financial planner before making any decisions regarding your superannuation.