Releasing early superannuation as a response to a coronavirus-ravaged economy will rely on how well the Tax Office works with funds, industry bodies have tipped.
The measures unveiled within the second stimulus package on Sunday will see eligible members in financial stress be able to withdraw $10,000 of their super before July and a further $10,00 in the financial year.
They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
Industry Super Australia chief executive Bernie Dean revealed the government had not consulted industry funds prior to triggering the measure, but the body has stood ready to support and work through it regardless.
Both he and Australian Institute of Superannuation Trustees CEO Eva Scheerlinck have said the success of early raids will depend on the ATO.
“As we have been indicating publicly, this is an issue that must be handled very carefully in order to prevent the compounding of liquidity pressures that may be faced by superannuation funds in the current market conditions, and as they support anxious members,” Mr Dean said.
“Assisting those in financial hardship will come down to how well the ATO works with the funds, given each superannuation fund will have to manually issue the money.
“Effective co-ordination from the government and the ATO will be vital to ensure the scheme works efficiently and does not frustrate people further – remembering that the workforce of many funds [is] working remotely just like other affected businesses.”
Meanwhile Ms Scheerlinck said the AIST will work with its member funds, the government and regulators to address administrative challenges and risks for income support measures to be implemented in an orderly way.
“The measures announced significantly broaden the eligibility requirements for the early release of super and can only be effectively administered by the ATO, particularly in light of its enhanced online capability,” she said.
But she noted, the measure is a “last resort”, and its mechanism should avoid locking in current losses for members.
“AIST is urging Australians who are facing financial hardship to access all other sources of income measures before tapping into their super,” she said.
“AIST is working with its member funds to explore other opportunities with superannuation to assist the community in these difficult times.”
Industry Super also has called for transparency from the government on the scheme’s applications and any issues it encounters.
“The scheme should also be reviewed as it is rolled out to ensure it will not hamper funds’ capacity to support the macro-economic recovery,” Mr Dean said.
The early super release measure is estimated to cost $1.2 billion over the forward estimates period.
Meanwhile the Association of Superannuation Funds of Australia (ASFA) stated: “The measures announced are very broad in terms of eligibility and we will work with our members to help understand the challenges that they will present.”
Further, the government will also temporarily reduce superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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