Can I Withdraw Super To Pay Debt?
There is no doubt that as a nation we are currently navigating unprecedented times with a global pandemic sending us into lockdown. Businesses were forced to shut down as employees worked from home and countless more lost their jobs. As a result, Australians were given the option to access their Super funds. This decision was made by the Government to help keep people afloat in these challenging times. But the question is, can I withdraw Super to pay debt?
Eligibility To Withdraw Super
Many Australians are currently experiencing financial hardship due to the Coronavirus outbreak. As a result, the Government is allowing eligible account holders to withdraw up to $10,000 from their Super to help them out.
As of mid-June, around 2.3 million people had applied to access their Super. These funds are not taxed and according to the ATO, will not affect Centrelink or Veterans’ Affairs payments. So firstly, how do you know if you are eligible?
As a permanent resident, you must satisfy one or more of the following:
- Be unemployed
- Eligible for job seeker payment, youth allowance for job seekers, parenting payment, special benefit or farm household allowance.
- On or after 1 January 2020, you were either made redundant, had your working hours reduced by 20% or more, or as a sole trader your business was suspended, or more than 20% reduction in turnover.
Knowing this key information, the next thing to look at is, can I withdraw Super to pay debt?
Can I Withdraw Super To Pay Debt?
By applying for financial hardship on the terms above, you are able to use the money to pay off your living expenses. This covers your payments that are in arrears. Therefore, helping to pay off any debts that have accumulated as a result of your lost income. But this is not intended to get you out of larger debts.
If you’re wondering “Can I withdraw Super to pay debt” you are obviously in a questionable financial position that you are looking to get out of. Accessing your Super might seem like the easy option in the current situation. However, there are long-term implications that need to be considered before going ahead.
Long Term Effects Of Accessing Super Early
The most obvious impact accessing your Super funds early has is leaving you with a reduced amount of funds available in later life. This can leave you short on money when you need it most. Super balances have dropped significantly in light of the recent pandemic. By accessing your funds on top of this, you will really feel the effect later on. Many people are often more concerned with their situation right now, and not so much on how it might affect them in future years. Let’s take a look at it another way.
While $10,000 may not seem like a huge figure right now in comparison to how much financial help it could offer you, take a look at it this way. According to Industry Super Australia (ISA) Chief Executive Bernie Dean, a 20-year-old who accesses the full $10,000 available under the scheme could lose more than $120,000 from their retirement. For a 40-year-old this works out at $63,000 by retirement. This is a huge cost to factor in. While the money may seem worth it now, it may not be worth it in the long run.
It also has an impact through your life insurance. For more than 70% of Australians with life insurance, it is held through Super. This means if your balance falls, so does the amount that can be claimed if the worst were to happen. Another important point to factor in when asking yourself whether you can withdraw your Super to pay debt.
Instead of asking, “Can I withdraw Super to pay debt” the better question to be asking yourself is, “Should I withdraw Super to pay debt”.
Paying Off Debt
No-one likes to be in a position of debt. We all want to get out of it as quickly as possible. It’s about working out the best scenario for your circumstances and going from there. Can you manage to work out a payment plan to get you through? If not, then alternatively can look into consolidating all your debts to make them easier to manage and pay off. If you feel like you are struggling, you can always reach out to professionals for help.
The team at Debt Consolidation will look at your individual circumstances to find the best way to get you out of debt. Debt consolidation comes with many advantages, such as getting all your debts into the one place, with the one interest payment. This way, you can make loan repayments more easily and save money in the process. If you are looking to get yourself out of debt, then get in touch today.