Warning $10,000 early access to super due to covid-19. Conditions and penalties apply
7th July, 2020
In order to assist people who are experiencing serious financial difficulties arising from the Covid-19 pandemic, the Australian government is allowing eligible people early access to up to $10,000 of their superannuation in 2019-20 and a further amount up to $10,000 in 2020-21.
You can find details of the scheme, including the eligibility criteria, at the following link: https://www.ato.gov.au/individuals/super/in-detail/withdrawing-and-using-your-super/covid-19-early-release-of-super/
Make sure you are eligible before you apply
It’s important for you to ensure before you apply that you meet the eligibility criteria. These criteria include that you are unemployed or that your hours of work have been reduced by 20% or more.
If you apply for early access without meeting the criteria, especially if you apply knowing that you don’t meet them, you are facing severe penalties.
The Australian Tax Office (ATO) could not be any clearer. Here’s a direct quote from their website:
“You need to check the eligibility criteria carefully before you apply for COVID-19 early release of super and keep records that demonstrate your eligibility. If you apply and you’re not eligible at the time of submitting your application, we will take action.
If you are unable to demonstrate your eligibility when we ask for evidence, we may revoke the determination issued for your application. This means the amount paid to you under COVID-19 early release of super will:
• become assessable income
• need to be included in your tax return and you will pay tax on the released amount.
If you provide false or misleading information you could face penalties of more than $12,000 for each false and misleading statement”.
The ATO has even listed the way in which they can detect deliberate malpractices and the behaviours that will attract their attention for further examination. So be warned. The Covid-19 early access arrangement is designed to assist genuine cases of financial hardship. It’s not designed for people who would simply like to get hold of some money out of their superannuation.
Other factors to consider include:
1) the impact that withdrawing this money now will have on your superannuation entitlements in retirement. This could be a considerable amount. Consider speaking with a financial adviser or your superannuation fund about this issue. For most military members visit https://www.csc.gov.au/News/Five-things-about-Early-access-to-super; and
2) the possibility that scammers might try to access your superannuation under this scheme and/or offer you high return (“too good to be true”) investment opportunities. There’s more on this at https://moneysmart.gov.au/covid-19
Are you experiencing financial hardship?
If you are experiencing financial hardship due to Covid-19 or for any other reason, please contact us. We can assist with information and a referral to a qualified free financial counsellor whose job is to help you resolve financial stress, not sell products to you.
