This is one of the most common questions being asked right now. Bills are coming in, you have lost your job or have been put onto Job Keeper, so how are you supposed to get through this crisis period?
Figures from the Australian Tax Office (ATO) suggest that almost 500,000 Australians dipped into their Superannuation after the Federal Government announced they could if their pay had been affected due to COVID-19. Figures also suggest that more than a third who accessed their superannuation were under the age of 30.
What is the system that allows access to super now?
You usually wouldn’t be able to access your super until you reach retirement age, but because of the huge financial impact of coronavirus, the rules have changed.
Under the scheme, Australians can take up to $10,000 from their super this financial year and can request a further $10,000 after July 1 if they can show financial hardship and get early access to super under these provisions.
The scheme is designed to help those genuinely cash-strapped due to the pandemic, however, some economists suggest that you’re essentially raiding your future to help yourself today.
With models showing an impact of between $30,000 and $90,000 when it comes to retirement (depending on your age, starting balance and returns), this can have a devastating impact down the line, all because you’re missing out on the benefit of compound interest.
As a result this should really only be used as a last resort. It should not be the first strategy used to get through as the long term cost to your retirement could be substantial.
What are my alternatives?
If you’re not in dire straits just yet, there are a few other options at hand. You may also have access to the Jobseeker or other Centrelink payments like rent relief.
If you have lost your job and have a mortgage or other debts, you may be eligible for financial hardship arrangements through your bank. The banks have been very accommodating in delaying repayments for up to six months on loans, inlcuding home loans and car loans.
Got questions about managing your business? We’re here to help.
As the economy starts to reopen, it is important to realise that the months ahead are going to be tough. This will definitely be a recession. How bad it becomes is anyone’s guess. Many economists have differing opinions on how long this is going to take to return to ‘normal’ conditions. Now is the time to start planning and navigating and interpreting what this means for you and your business.
Whether you want information on budgeting and business strategy or understanding what is happening with your superannuation or investments – Sharp Accounting and our referral partners can help.
Find out more about what we do here: https://sharpaccounting.com.au/what-we-do or get in touch with us now below.