Nearly 500,000 Australians Deplete Retirement Savings

Source: Regulation Asia Editors, Regulation Asia 2020-07-06

Industry Super Australia estimates that 480,000 Australians have wiped out their superannuation savings through the government’s early release scheme.

An estimated 480,000 Australian nationals have wiped out their superannuation savings under the government’s early release scheme, according to new analysis from ISA (Industry Super Australia).

The early release scheme for superannuation was announced as part of the government’s Covid-19 economic response, allowing individuals facing financial hardship tax-free access of up to AUD 10,000 of their superannuation in 2019-2020 and a further AUD 10,000 in 2020-2021.

As of 21 June, up to 2.3 million early release applications have been paid out, totalling AUD 17.1 billion. On average, about 15 percent of Australian workers have accessed their superannuation early, according to the ISA report.

Of the estimated 480,000 people who have wiped out their super savings (based on 14 June data), 395,000 are in the under-35 age group, even before the second tranche has opened, ISA says. In addition, there have been “troubling reports” of super being used to gamble, buy alcohol or other types of discretionary spending.

ISA says that the early release scheme should only be used as a “last resort”, warning of the long-run impact to retirement savings. “To have hundreds of thousands wiping their savings out mid way through their life is a tragedy waiting to happen and it will affect everyone,” said ISA Chief Executive Bernie Dean. “Every Australian deserves a good life in retirement, not just scraping by on the pension.”

ISA is calling for Prime Minister and Treasurer to “stick by their promise” to increase the super rate from 9.5 per cent to 12 per cent by 2025, saying it is “critical” to help people rebuild the savings they’ve wiped out.

The ATO (Australian Taxation Office) has also previously warned wrongful withdrawal of superannuation savings by ineligible workers, saying penalties up to AUD 12,600 could be imposed – or in extreme cases, prosecution – on those who have made false statements.

The ATO is also on the lookout for those who may have withdrawn their super savings and then re-contributed it for tax benefits.

Separately, the AFP (Australian Federal Police) has reportedly frozen an estimated AUD 200,000 in more than 50 bank accounts on suspicion of fraud. Where criminal syndicates – including those overseas – are alleged to have used cyber attacks against tax agents to steal client data and apply for the early release scheme.

ISA

early release scheme

Nearly 500,000 Australians Deplete Retirement Savings

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