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Super Early Release Scheme

Core ThinkingTom HackettTom Hackett1 minute read

Under the Super Early Release Scheme, eligible Australians were able to withdraw $10,000 from their super in 2019-20 and a further $10,000 in 2020-21. Already, more than two million Aussies have jumped at the chance to access their superannuation early – but is it right for you?

Government policy

Previously, both sides of government have set the bar very high in terms of withdrawing superannuation early. 

This is because early release superannuation risks undermining retirement income and compromising financial system stability. In other words, there is a real risk of short-term gain for long-term pain.

According to research from the University of New South Wales, to receive the equivalent of an average wage in retirement, approximately $85,000 p.a. before tax, you’ll need to save about 15 to 20 times that amount. That's $1.3 million to $1.7 million at today’s prices.

New early access ground rules

A snap study conducted by Roy Morgan research found a majority (79%) of Australians are in favour of people in financial difficulty being able to access their super. 

To apply for early release, you must satisfy at least one of the following criteria:

  • You must be unemployed
  • You must be eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment or other special payment
  • After 1 January 2020:
    • You were made redundant
    • Your working hours were reduced by 20% or more
    • As a sole trader, your business was suspended or there was a reduction in your turnover of 20 per cent or more.

​Making the right decision for you

In terms of cost/benefit, assuming 6% average return and retirement at 67, $20,000 withdrawn at aged 25 may mean approximately $50,000 less upon retirement (in real $2020).

For some, the impact (so far) of COVID-19 has been so devastating that accessing superannuation early is to feed the family or avoid homelessness. Of course, it is very difficult to argue against this last-resort situation.

However, if you just want some cash to buy a new TV or car or even to pay off some minor debts, we would recommend your super is probably best left untouched.

If you have any questions, please contact our knowledgeable wealth and accounting advisors.

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