More than one million Australians who don’t qualify for the Coalition’s early access to super scheme still intend to make claims – potentially slowing the process for those in desperate need of cash.
Research from Industry Super Australia (ISA) shows up to 40 per cent of Australians (more than one million) planning to apply for the scheme, which opened on April 20, may not meet the strict eligibility criteria.
The strict requirements were put in place to ensure only people financially affected by the coronavirus will dip into their superannuation.
To make a successful claim, applicants must satisfy at least one of the following requirements:
- Have lost their job
- Are eligible to receive certain social security payments
- Have lost their job, or 20 per cent of their work hours
- Have lost 20 per cent of their turnover (if they are sole traders).
Government initially estimated 1.5 million people would ask to access money through the scheme, removing a total of $27 billion from the system.
But ISA cautioned the true number of applicants will well exceed those estimates if ineligible applicants also try removing savings.
ISA estimates more than $40 billion could be prematurely removed from the super system if claims are not adequately screened to ensure applicants meet the eligibility requirements.
These additional early access claims could also create a backlog of claims for the tax office to process, meaning Australians in dire need of their money could be forced to wait.
“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,” ISA chief executive Bernie Dean said.
“The Australian Taxation Office has assured us there is a robust compliance regime in place and those who deliberately flout the rules could face severe penalties.”
Even so, ISA urged the ATO to conduct random checks on claims to discourage ineligible applicants clogging up the system, and to keep tabs on claim volumes.
Mr Dean also advised would-be applicants to consider other options before taking money out of super due to the out-sized effect it will have on their savings balance at retirement.
Research from Super Consumers Australia – the retirement savings arm of consumer group Choice – found members who withdraw $20,000 now could lose almost $50,000 by the time they retire.
“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,” Mr Dean said.
“It should be treated as a last resort.”
MoneySmart, the corporate regulator’s consumer financial literacy website, encourages Australians to check how their retirement balance will be affected using their online calculator before trying to access their super.
The New Daily is owned by Industry Super Holdings