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4 Things you need to know before accessing your super early.


Photo courtesy: Patrick Fore collected from Unsplash


Due to COVID-19 pandemic, a lot of people are going through immense financial distress around the world. In Australia, the government has been taking several measures, including the early access to super funds, to reduce the effect of the economic crisis. If you are in financial distress due to COVID-19, you may be eligible to access a part of your superannuation early.


Eligible citizens and permanent residents of Australia and New Zealand can submit an application through ATO between 1 July 2020 and 24 September 2020 to access their super early. The government has announced that they will extend the application period to 31 December. If you want to know more about the scheme, please visit https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/early-access-to-your-super/


The government has taken this measure to relieve the economic pressure on people who are adversely affected by the pandemic and have no other means to survive. However, you need to be very cautious before accessing your super early. It should only be used as a last resort. Early access to super can hurt your retirement savings. It also can have a more significant impact on your insurance than you would have expected.


We strongly recommend that you should seek professional advice before accessing your super early. If your income capacity has been affected by any injury or illness there may be alternative lump sums available to you.


Following are the things you need to know before you access your super early:


1. Who is eligible to access super early?


You may be eligible to access your super early if:

  • you are unemployed

  • you are eligible to receive one of the following:

  1. Job Seeker payment;

  2. Youth Allowance for job seekers (unless you are undertaking full-time study or are a new apprentice);

  3. Parenting payment (which includes the single and partnered payments);

  4. Special Benefit;

  5. Farm Household Allowance

  • on or after 1 January 2020 either

  1. you were made redundant;

  2. your working hours were reduced by 20% or more (including to zero);

  3. you were a sole trader and your business was suspended or there was a reduction in turnover of 20% or more (partners in a partnership are not eligible unless the partner satisfies any other of the eligibility).

  • you are over the minimum retirement age (55-60), have been on Centrelink payments for nine months, and won't be going back to regular work;

  • you are over the minimum retirement age (55-60) and still working;

  • you need money to pay for palliative care, funeral expenses, modifications to your home or car as a result of a disability, or medical and transport expenses for you or a dependant;

  • you need to make loan repayments to prevent the sale of your home if you are in financial distress;

  • you are permanently incapacitated for work;

  • you have a terminal illness;

  • the preserved amount is $200 or less;

  • you are a temporary resident and permanently leave Australia.

These are very strict criteria, with potentially severe penalties for those seeking early access to their super despite their ineligibility.

Applications are made to either your super fund or the Australian Taxation Office, depending on which category of early access claim you are making. If you’re a temporary resident, applications are made through the Australian Taxation Office.


2. What would be the impact on my insurance if I access my super early?

Early withdrawal of super may have an adverse impact on your insurance. There are a lot of people who do not realise that they have death and total and permanent disability insurance in their super. Some people may also have income protection insurance cover. This is often the only insurance you might have. Such insurances can be a very critical lifeline at times like this global pandemic. People who are unable to work, at the moment, due to injury or illness, may need their insurance more than ever. Research shows that disability insurance is most utilised in the past during and as a result of an economic crisis, like the one we are facing now. Therefore, the loss of those insurance covers, when you need those the most, might have a significant impact on your financial well-being.

  • In 2019, laws directed the super funds to cancel insurance attached to the member accounts if they don't receive any contributions for 16 months or have a balance of less than $6000.

  • The Federal Government, however, has provided that if you had an active account with more than $6000 any time before 1 November 2019 your insurance won't be switched off.

  • That means, if your balance drops below $6000 due to accessing super early, under the new provisions, your insurance will not automatically be cancelled.

  • But if your account does not have enough money to pay the premiums, after you have accessed your super, then your insurance will be cancelled.

3. What Should I be Aware of While Deciding an Early Access of My Super?

  • Potential fraud-

There have been reports of scammers targeting the early release of the super scheme. There are a number of scam alert in the ATO site at the moment in this regard. It is reported that the scammers had been creating fake MyGov account to make applications to access people’s super account without their knowledge. Because of these fraudulent activities, the government had to suspend the scheme for a while before opening it again. However, the risk of fraud is still there because of the vast number of the application and quick nature of the proceeding. Therefore, you have to be very vigilant about the security of your super account. You should also get clarification from your super fund about who will payout in the event of any fraudulent withdrawal from your super fund without your knowledge.


  • The pressure to access super to pay rent and other essential services-

Unfortunately, there are several reports of landlords and real estate agents creating pressures on tenants, going through financial difficulties, to withdraw their super to cover the rent. In this connection, ASIC has issued a warning that such conduct could lead to fine and imprisonment as a breach of the Corporation Act. You should understand your rights before you think about accessing your super to cover your rent and other essential services with it.

You should know that in the event of bankruptcy, super is one of the few savings that stay out of the reach of the creditors. It demonstrates the crucial role of super in retirement and the importance of protecting it for your future. Therefore, if you are in extreme financial distress, you should explore all options before drawing on your super, particularly if there is a risk of bankruptcy.

  • Pressure from family members & close contacts to access super early

The opportunity to early access of super is creating a very high risk for vulnerable people being pressured by the family members or close contacts to withdraw their super. It had been reported that there are a substantial number of women in an abusive relationship and people with disabilities who are unable to make an informed decision, are withdrawing super early to their detriment. There are also reports of people, who are going through divorces, are accessing their super to reduce their ex-partner’s entitlements.

4. What would be the long-term effect of early access of super?


You should understand that your superannuation is your retirement savings. It might seem very convenient, at the times of financial distress, to quickly access a lump sum from super. However, that action might have a big detrimental effect on your retirement. Especially for the young workers, a small withdrawal now might have a very significant impact on their eventual retirement savings.


An analysis provided by Industry Super Australia showing that withdrawing $20,000 over the next year could cost 30 years old over $100,000 and 40 years old over $63,000 at retirement. Therefore, early access to super now might be the difference between a dignified retirement versus a welfare reliant retirement. Therefore, you should consider early access to super only as a last resort and with proper financial advice. Professional advice should help you to manage the immediate and long-term financial impacts of such withdrawal from your super.


If you need help to find a lawyer or financial adviser who can help you to better understand the impact of your decision and manage the same, please feel free to contact us on www.lawcircuit.com.au

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