More than $1.3 billion of super has been paid to Australians in dire financial need as a result of COVID-19.
More than 150,000 Australians have already been paid a portion of their superannuation after the government allowed an early release of funds to lessen the economic impact of COVID-19.
That totals more than $1.3 billion, and Australia's financial watchdog is currently sifting through more than half a million more applications.
The average value of superannuation released to members is $8,002, prompting many people to ponder what they can and can't use the money for. Here's what we know so far:
EXPLAINED: Who is eligible to access superannuation early and how to do it
Can I use my super to buy a house?
Strictly speaking, no. Your superannuation is your insurance policy that is there to fund your lifestyle when you retire.
But it's not black and white. If you operate a self-managed super fund (SMSF), you can buy an investment property but you can't use your super balance to buy the primary residence you plan on living in.
In 2017 the government introduced a new scheme where first home buyers could access up to $15,000 of their superannuation to contribute to a house deposit.
You can read the full details about that scheme here.
So can I apply for COVID-19 release of super, and then use that for property?
No. According to the Australian Tax Office, "withdrawing your super early unless you meet a condition of release is illegal".
The conditions of the COVID-19 release of super are really clear: you must be unemployed, eligible for a job seeker payment or from January 1 this year you were made redundant, or your working hours were reduced by 20 per cent or more.
The list of eligibility can be found on the ATO's website here.
The bottom line is, early release of superannuation on the grounds of COVID-19 are for those who are really financially struggling – and who are likely not in a position to secure finance for a property regardless.
How much money is the government giving out from super?
If you are eligible, the government is allowing residents to apply to access $10,000 of their super before July 1, 2020 and a further $10,000 from July 1 2020 until September 24 2020.
Effectively, you can withdraw a maximum of $20,000.
What can I use my super to pay for?
Make no mistake, your superannuation is your hard-earned money. Outside of self-managed super funds, once you have been given the money no one can tell you how to spend it.
But – read this again – you must meet a condition of release to get the money in the first place.
According to the ATO, some people promote early release of super schemes that promise the world.
"They might tell you they can help you withdraw your super to pay off credit card debt, buy a house or car, or go on a holiday. These schemes are illegal," the ATO's website reads.
"Illegal schemes will cost you a lot more than the super you withdraw and will get you into trouble."
Why are people warning about accessing it early?
There are potentially long-lasting and damaging effects to accessing your super early. Withdrawing super early will affect your super balance and may affect the amount you have to retire on.
Your superannuation is held in a fund that re-invests a portion of it in a wide number of sectors.
Just like your bank account, the amount of super you have grows when you put money into it, and when your fund pays you a return on their investments (a little bit like earning interest).
It's reasonable to expect that $5000 in your super account will not still be worth $5000 when you retire – that's why experts are heeding caution over accessing it early.
For example, if you are 25- years-old and you withdraw the full $20,000 now, you could lose close to $120,000 by the time you retire.
Additionally, withdrawing superannuation may also affect your income protection insurance as well as life insurance and total permanent disability cover.
It's an extremely wise idea to seek qualified financial advice on whether you should access it early – while this article is for your information, it is not qualified advice.
There's a great calculator on the government's Moneysmart website which can help you work out how much super you'll have when you retire.
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The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.
Source: 9News https://www.9news.com.au/national/coronavirus-superannuation-scheme-can-i-use-my-super-to-buy-a-house/d299e07e-1c32-4d58-ab7b-b0cb8cf597e7