Two thirds of Aussies who accessed super plan to double dip

Two thirds of Aussies who accessed super plan to double dip

Two thirds of Australians who have already dipped into their superannuation want to take out more this financial year, new research from RateCity showed.

Nearly 13 per cent had cashed out their retirement savings in the first round of the government’s early release of super scheme, the RateCity survey of 1,009 people found.

While the majority intend to pull out more money from their nest eggs before the end of the year, a third have no plans to access more of their super.

To date, 3.8 million financially distressed workers have received $29.4 billion in super payments to help them manage the economic impacts of COVID-19, the latest Australian Prudential Regulation Authority (APRA) figures showed. 

Of those, more than a million have already applied to raid their nest eggs for a second time, with repeat applications totalling $8.9 billion between July 1 and 26.

The federal government allowed millions of Australians whose work and income has been negatively affected by the pandemic to request up to $10,000 of their retirement savings between April 20 and June 30. 

The scheme’s second round began on July 1 and will be open for applications until December 31. The new financial year allows many a second chance to take out another $10,000 from their super, making the maximum possible withdrawal for an individual $20,000.

How Australians spent their super money

Half of poll respondents used their super withdrawals to pay household bills, including mortgage repayments or rent. About 36 per cent spent their retirement savings to buy essentials like groceries, and a third chipped away at personal debt such as credit cards.

About 27 per cent stashed their super money in an emergency savings account, while one in nine are putting the cash towards a house deposit. 

While it’s worth noting that while some people used the money for more than one reason, not everyone has spent their retirement savings wisely

One in six said they splashed the cash on non-essentials such as TVs, technology or home improvements. Six per cent admitted to using their super to buy alcohol, and one in 20 gambled their retirement savings away.

But for Paul Birdsey, who has had his income from his job as a security guard cut due to the pandemic, taking $20,000 tax-free from his super fund was “a no-brainer”.

“You've got no options, it's not like you can get a part-time job somewhere because there's no part-time jobs to be had,” he told RateCity.

“The telco firms still want their money, the power firms still want theirs, so you’ve got to get it somewhere.”

The 57-year-old has been cautious with his withdrawn super money and JobKeeper income. He is thinking about setting up an emergency fund in case another crisis happens – something he had not considered before COVID-19.

“It's not like I accessed it to go on a holiday or buy a new yacht, I accessed the super for one reason and one reason only, and that was to keep functioning,” Mr Birdsey said.

He added that while many are concerned about their long-term savings, people were “entitled” to the money in their super.

What to do if you’re worried about your super withdrawal application

While many have taken money from their super legitimately, some who don’t meet the criteria may have been approved initially, as the application is based on self-assessment and doesn’t request proof of eligibility. 

Sally Tindall, research director at RateCity, warned those who have dipped into their retirement savings to make sure they’re eligible to avoid getting fined.

“Access to this scheme was deliberately made simple to speed up the process, and it’s possible some people withdrew their super when they weren’t actually eligible,” she said.

“The Australian Taxation Office (ATO) is reviewing applications they suspect don’t meet the criteria, so now is the perfect time to own up if you think you made a mistake.”

Ms Tindall said anyone who thinks they’ve made a mistake should get in touch with the ATO to see how it can be fixed.

“You may need to pay tax on the amount you took out, but it’s likely you’ll avoid a fine if you own up.”

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Learn more about superannuation

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

Click here for more information.

SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

Click here for more information.

Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

Click here for more information.

Do I have to pay myself superannuation if I'm self-employed?

No, self-employed workers don’t have to pay themselves superannuation. However, if you do pay yourself superannuation, you will probably be able to claim a tax deduction.

How much is superannuation in Australia?

Superannuation in Australia is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent 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 combine several superannuation accounts into one account?

The process used to consolidate several superannuation accounts into one is the same process used to change superannuation funds. This can be done through your MyGov account or by filling out a rollover form and sending it to your chosen fund.

What is MySuper?

MySuper accounts are basic, low-fee accounts. If you don’t nominate a superannuation fund, your employer must choose one for you that offers a MySuper account.

MySuper accounts offer two investment options:

  1. Single diversified investment strategy

Your fund assigns you a risk strategy and investment profile, which remain unchanged throughout your working life.

  1. Lifecycle investment strategy

Your fund assigns you an investment strategy based on your age, and then changes it as you get older. Younger workers are given strategies that emphasise growth assets

Who can open a superannuation account?

Superannuation accounts can be opened by Australians, permanent residents and temporary residents. You’re automatically entitled to superannuation if:

  • 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

How do you find superannuation?

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.

When is superannuation payable?

Employers must pay superannuation at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.

How much superannuation should I have?

The amount of superannuation you need to have at retirement is based on how much money you would expect to spend each week during your retirement. That, in turn, depends on whether you expect to lead a modest retirement or a comfortable retirement.

The Association of Superannuation Funds of Australia (ASFA) estimates you would need the following amount per week:

Lifestyle Singles Couples
Modest $465 $668
Comfortable $837 $1,150

Here is the superannuation balance you would need to fund that level of spending:

Lifestyle Singles Couples
Modest $50,000 $35,000
Comfortable $545,000 $640,000

These figures come from the March 2017 edition of the ASFA Retirement Standard.

The reason people on modest lifestyles need so much less money is because they qualify for a far bigger age pension.

Here is how ASFA defines retirement lifestyles:

Category Comfortable Modest Age pension
Holidays One annual holiday in Australia One or two short breaks in Australia near where you live Shorter breaks or day trips in your own city
Eating out Regularly eat out at restaurants. Good range and quality of food Infrequently eat out at restaurants. Cheaper and less food Only club special meals or inexpensive takeaway
Car Owning a reasonable car Owning an older, less reliable car No car – or, if you do, a struggle to afford the upkeep
Alcohol Bottled wine Casked wine Homebrew beer or no alcohol
Clothing Good clothes Reasonable clothes Basic clothes
Hair Regular haircuts at a good hairdresser Regular haircuts at a basic salon Less frequent haircuts or getting a friend to do it
Leisure A range of regular leisure activities One paid leisure activity, infrequently Free or low-cost leisure activities
Electronics A range of electronic equipment Not much scope to run an air conditioner Less heating in winter
Maintenance Replace kitchen and bathroom over 20 years No budget for home improvements. Can do repairs, but can’t replace kitchen or bathroom No budget to fix home problems like a leaky roof
Insurance Private health insurance Private health insurance No private health insurance

What superannuation details do I give to my employer?

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 should also provide your tax file number – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

What fees do superannuation funds charge?

Superannuation funds can charge a range of fees, including:

  • Activity-based fees – for specific, irregular services, such as splitting an account after a divorce
  • Administration fees – to cover the cost of managing your account
  • Advice fees – for personal investment advice
  • Buy/sell spread fees – when you make contributions, switches and withdrawals
  • Exit fees – when you close your account
  • Investment fees – to cover the cost of managing your investments
  • Switching fees – when you choose a new investment option within the same fund

How can I withdraw my superannuation?

There are three different ways you can withdraw your superannuation:

  • Lump sum
  • Account-based pension
  • Part lump sum and part account-based pension

Two rules apply if you choose to receive an account-based pension (also known as an income stream):

  • You must receive payments at least once per year
  • You must withdraw a minimum amount per year
    • Age 55-64 = 4%
    • Age 65-74 = 5%
    • Age 75-79 = 6%
    • Age 80-84 = 7%
    • Age 85-89 = 9%
    • Age 90-94 = 11%
    • Age 95+ = 14%

If you want to work out how long your account-based pension might last, click here to access ASIC’s account-based pension calculator.

What is superannuation?

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

How is superannuation regulated?

The Australian Prudential Regulation Authority (APRA) regulates ordinary superannuation accounts. Self-managed superannuation funds (SMSFs) are regulated by the Australian Taxation Office.