ATO tips for Aussies considering accessing their super early

Have you been hit hard financially by the economic impacts of COVID-19? You may be considering joining the millions of Australians who have dipped into their super to get them through this rough time.

The latest figures from the Australian Taxation Office (ATO) released to RateCity show that 2.57 million unique applications for early super release have been approved, totalling $30.2 billion. 

This equates to an average amount of $11,750 being withdrawn per person.

The government initially capped the total that could be withdrawn at $10,000 but has allowed for repeat requests as of this new financial year.  

If you’re looking to dip into your super for financial support, the ATO's Assistant Commissioner Sonia Corsini has some handy tips that you may want to know before you begin your application.

Top tips from the ATO for early super withdrawal

1. Are you eligible for early super withdrawal?

It's clearly important to make sure you can withdraw your super, and if you're looking to this approach, it might be time to get some reading done and dusted.

"The eligibility criteria is outlined on our website," said Ms Corsini. It’s really important that you carefully read the criteria and only apply if you meet it. If you’re not sure, ask your tax professional or financial advisor for advice about eligibility and whether accessing your super is the right decision for you. If you’re a temporary resident, you are not eligible to apply from 1 July 2020." 

 2. Is your record keeping in order? 

You may not think those records matter, but financial details could be everything when it comes to having the ATO approve your application.

"We don’t ask you to include supporting evidence when you submit your application, but you should keep good records to support your application. For example, payslips or bank statements or letters of dismissal from your employer," said Ms Corsini.

"We might ask you to explain how you assessed your eligibility and provide evidence to us. If you are unable to demonstrate your eligibility, we may revoke the determination that we issued in respect to your application. That means that any money you withdrew from super will be taxable and you’ll need to include it in your tax return. In addition to this, we may apply financial penalties for the most serious cases.

"If you think you may have done the wrong thing, it is much better to come forward to make a voluntary disclosure than to wait to be audited. If in doubt on how to proceed, we recommend seeking the advice of a tax professional. We know people make mistakes so we will work with you to help to remedy your position" said Ms Corsini.

3. Have you linked to ATO on myGov?

"You’ll need to be linked to the ATO on myGov in order to apply. If you aren’t already linked to the ATO on myGov, follow the instructions at ato.gov.au/MyGovLinking," she said.

These days, everything is to an online presence, and there's no exception here. Make sure your myGov is connected to the ATO, otherwise you might be in for a hard time. 

4. Take your time and please be patient

Even if you've decided that yes, you'll be getting money out from super, Ms Corsini advises taking your time to ensure all the details are right. 

"Take your time with your application, and don’t rush! Mistakes can slow your application and payment down unnecessarily. Double check details like your bank account details and make sure they are correct before submitting," she said. 

"And once you have lodged your application, please be patient. It’s a busy time but we are working as hard as we can to process applications quickly and we know the funds are processing payments as quickly as they can" said Ms Corsini.

5. Watch out for scammers! 

And finally, while you're being careful about details, make sure to be cautious about anyone asking to go through the work for you. Scammers are about and will happily take your money if you let them, and we doubt you'd want that to happen.

"Applying for early access to your superannuation under the COVID19 scheme is a free service. You do not need to pay someone to do it for you. If you receive a text message or e-mail stating that your myGov details have been changed, or that you have applied for early release of super and you have not, don’t ignore these messages: check your myGov, call the ATO and your super fund to make sure your identity has not been compromised."

"But don’t click on any links – one technique used by scammers to steal your information is to mock-up messages which appear to be from the ATO. To see how to identity and report a suspected scam, head to ato.gov.au/scams" said Ms Corsini.

  • Keep in mind that superannuation is there to support you in retirement. Raiding your nest egg may make a serious dent in your final balance - a $20k dent if you're not careful. 

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Learn more about superannuation

When can I access my superannuation?

You can withdraw your superannuation when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

The preservation age – which is different to the pension age – is based on date of birth. Here are the six different categories:

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

A transition to retirement allows you to continue working while accessing up to 10 per cent of the money in your superannuation account at the start of each financial year.

There are also seven special circumstances under which you can claim your superannuation:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

 

What is the age pension's assets test?

The value of your assets affects whether you can qualify for the age pension – and, if so, how much.

The following assets are exempt from the assets test:

  • your principal home and up to two hectares of used land on the same title
  • all Australian superannuation investments from which a pension is not being paid – this exemption is valid until you reach age pension age
  • any property or money left to you in an estate, which you can’t get for up to 12 months
  • a cemetery plot and a prepaid funeral, or up to two funeral bonds, that cost no more than the allowable limit
  • aids for people with disability
  • money from the National Disability Insurance Scheme for people with disability
  • principal home sale proceeds you’ll use to buy another home within 12 months
  • accommodation bonds paid on entry to residential aged care
  • any interest not created by you or your partner
  • a Special Disability Trust if it meets certain requirements
  • your principal home, if you vacate it for up to 12 months
  • granny flat rights where you pay more than the extra allowable amount

For full pensions, reductions apply when your assessable assets exceed these thresholds:

Category

Home owners

Non-home owners

Singles

$253,750

$456,750

Couples living together

$380,500

$583,500

Couples living apart due to ill health

$380,500

$583,500

Couples with only one partner eligible

$380,500

$583,500

For part pensions, reductions apply when your assessable assets exceed these thresholds:

Category

Home owners

Non-home owners

Singles

$550,000

$753,000

Couples living together

$827,000

$1,030,000

Couples living apart due to ill health

$973,000

$1,176,000

Couples with only one partner eligible

$827,000

$1,030,000

For transitional rate pensions, reductions apply when your assessable assets exceed these thresholds:

Category

Home owners

Non-home owners

Singles

$503,250

$706,250

Couples living together

$783,000

$986,000

Couples living apart due to ill health

$879,500

$1,082,500

Couples with only one partner eligible

$783,000

$986,000

How do you open a superannuation account?

Opening a superannuation account is simple. When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

How is superannuation calculated?

Superannuation is calculated at the rate of 9.5 per cent of your gross salary and wages. So if you had a salary of $50,000, your superannuation would be 9.5 per cent of that, or $4,750. This would be paid on top of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How do I change my superannuation fund?

Changing superannuation funds is a common and straightforward process. You can do it through your MyGov account or by filling out a rollover form and sending it to your new fund. You’ll also have to provide proof of identity.

What is the superannuation rate?

The superannuation rate, or guarantee rate, is the percentage of your salary that your employer must pay into your superannuation fund. The superannuation guarantee has been set at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How does superannuation affect the age pension?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

Am I entitled to superannuation if I'm a contractor?

As a contractor, you’re entitled to superannuation if:

  • The contract is mainly for your labour
  • You’re over 18 and earn more than $450 before tax in a calendar month
  • You’re under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

Please note that you’re entitled to superannuation even if you have an Australian business number (ABN).

What is salary sacrificing?

A salary sacrifice is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Salary sacrifices come out of your pre-tax income, whereas personal contributions come out of your after-tax income.

Can I transfer money from overseas into my superannuation account?

Yes, you can transfer money from overseas into your superannuation account – under certain conditions. First, you must provide your tax file number to your fund. Second, if you are aged between 65 and 74, you must have worked at least 40 hours within 30 consecutive days in a financial year. (Australians under 65 aren’t subject to a work test; Australians aged 75 and over cannot receive contributions to their superannuation account.)

Money transferred from overseas will generally count to both your concessional contributions limit and your non-concessional contributions limit. You will have to pay income tax on the applicable fund earnings component of any money transferred from overseas. You might also be liable for excess contributions tax.

Can I take money out of my superannuation fund?

Superannuation is designed to provide Australians with money in their retirement. The government has strict rules around when people can take that money out of their fund because it wants to prevent people eroding their savings before they reach retirement.

As a general rule, you can only take money out of your superannuation fund when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

That said, you can take money out of your superannuation fund early based on one of these seven special conditions:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

How do you find lost superannuation funds?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

You can use your MyGov account to see details of all your superannuation accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

What is superannuation?

Superannuation is money set aside for your retirement. This money is automatically paid into your superannuation fund by your employer.

Can I buy a house with my superannuation?

First home buyers are the only people who can use their superannuation to buy a property. The federal government has created the First Home Super Saver Scheme to help first home buyers save for a deposit. First home buyers can make voluntary contributions of up to $15,000 per year, and $30,000 in total, to their superannuation account. These contributions are taxed at 15 per cent, along with deemed earnings. Withdrawals are taxed at marginal tax rates minus a tax offset of 30 percentage points.

Voluntary contributions to the First Home Super Saver Scheme are not exempt from the $25,000 annual limit on concessional contributions. So if you pay $15,000 per year into the First Home Super Saver Scheme, you have to make sure that you don’t receive more than $10,000 in superannuation payments from your employer and any salary sacrificing.