Accessing Superannuation should be last resort
New polling shows more than 1 million people who have not been financially impacted by the Coronavirus shutdowns are intending to access their super early.
A UMR survey conducted in the first two weeks of April, commissioned by Industry Super Australia (ISA), shows as many as 40 per cent of applicants may not satisfy the eligibility criteria for early access to super.
This high number of ineligible claimants would not only undermine the policy intent of the scheme but could slow down the processing of applications for those who urgently need financial support.
To qualify for the government’s early release of super, claimants must be eligible for a qualifying social security benefit, have lost their job, or had a reduction of hours or if a sole trader turnover, by 20 per cent or more.
“It is important that those that need to access their super can do so quickly, without being caught behind an administrative logjam of ineligible claimants,” said Industry Super Australia Chief Executive Officer Bernie Dean.
About 30 per cent of the 1100 people polled who were under 65 with a super balance, said they were either very likely or likely to take up the scheme. On average they said they would take out about $13,500 each – the scheme allows for $10,000 now and another $10,000 after July 1.
But worryingly 40 per cent of those who said they intend on making a claim had not yet been financially impacted by the Coronavirus shutdown.
Of those who are very likely to claim 46 per cent said they were still in paid work and their hours had not been reduced due to the COVID-19 economic shut down. And 40 per cent of those very likely to take up the scheme are in households that earn more than $104,000 a year.
While 29 per cent of those very likely to claim said they were worried their job might be impacted at some point, indicating they were accessing the scheme to build up a savings buffer.
“It is tempting to tap into your super early, some may want to do so as a savings buffer, but nothing in life is for free and cracking open your nest egg comes at steep cost –it should be treated as a last resort,” said Mr Dean.
Treasury has estimated 1.5 million will take out $27 billion from super but the polling and other ISA analysis suggests the take-up could be far higher – in excess of $40 billion.
The results should prompt urgent action by relevant regulators including the announcement of random checks on claims to deter inappropriate applications and real time monitoring of claim volumes. The ATO should also continuing issuing clear warnings that anyone flouting eligibility rules could be penalised.
“The Australian Tax Office has assured us there is a robust compliance regime in place and those who deliberately flout the rules could face severe penalties."