How Will You Pay the ATO Fine and Tax If You’ve Withdrawn but Are Ineligible for Covid-19 Super $10,000?

As we are all aware, if you are experiencing financial stress as a result of Coronavirus, you may be able to access your superannuation.

When the ATO provided the ability to access a $10,000 COVID-19 Superannuation payment both before and after 30 June 2020, this payment was subject to specific eligibility conditions - ATO - COVID-19 early release of super.

The below article states that over 2 million people have applied for and received either part or all of the first $10,000.

Many people who were already experiencing financial stress PRIOR to COVID-19 were amongst those who applied for and received this payment.

However, if they do not meet the eligibility criteria – ie if they did not lose their jobs or if their working hours were not reduced by 20% or more – the ATO has recently released information stating that the penalties may be harsh.

Ineligible-aussies-withdrawing-super-risk-huge-fine

"The amount paid under Covid-19 early release of super will become assessable income [and] need to be included in your tax return and you will pay tax on the released amount", the ATO said.

Australians who give false or misleading information will also face penalties of more than $12,000 for each offending statement.

In order to determine if people have been making false statements or fraudulent attempts to meet the eligibility criteria, the ATO will be accessing your personal information from –

  • Single Touch Payroll (STP)
  • income tax returns
  • information reported to us by your super fund
  • third party data from agencies including Services Australia Home Affairs.

 

***You are strongly urged to urgently speak with your Accountant, and if he/she confirms that you are not eligible for this Superannuation payment, seek their confirmation that you should return it to your Fund prior to 30 June 2020 to avoid the ATO tax and fine.

 

Effects on Retirement Superannuation Balance by Withdrawing $10,000

The calculator in the below video shows the adverse effect on the future retirement Superannuation amount of a 35-year-old, who withdraws only ONE amount of COVID-19 $10,000.

 

 

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This withdrawal could mean $100,000 less in their Superannuation Fund come retirement if they had $200,000 pre-COVID-19. And if they withdrew the full COVID-19 $20,000, their retirement Superannuation may be reduced by $200,000.

This may mean the difference between having a Modest Retirement Income and a Comfortable Retirement Income. Enter your Superannuation balance into the MoneySmart Superannuation Calculator to identify whether your future retirement may be modest or comfortable, and think about the detrimental effect of having $100,000 less in your retirement if you do withdraw the $10,000 now.

 

ASFA Retirement Standard Annual Living Costs Weekly Living Costs
Couple—comfortable $62,269 $1,193
Single—comfortable $44,146 $846
Couple—modest $40,560 $777
Single—modest $28,165 $540

 

If Ineligible, How Will You Manage Without the Superannuation $10,000, and You Are Experiencing Financial Stress?

A new client of Premier Spending Planners, who was experiencing financial stress and had been considering applying to access the $10,000 Superannuation due to personal cash flow problems NOT related to COVID-19, has had their personalised Spending Plan created and is overjoyed to find that they CAN now successfully manage their finances/budget without accessing any Superannuation.

This person on a single income of nett $60,000 not only has a medium sized personal debt to eliminate within 12 months but has known medical and vehicle repairs on their horizon, which was very stressful. Where would all the necessary money come from?

They are determined to stop paying 'dead rent' and purchase their first home as soon as possible, and now that they are aware of the negative implications of withdrawing $10,000 from their Superannuation, is fully committed to achieving the best possible amount of Superannuation for their retirement.

Their Spending Plan has shown how it will be possible to pay off the personal debt and vehicle repairs in 12 months, accumulate enough savings for the medical expenses in 18 months and accumulate $35,000 in just over 3 years for the house deposit.

Immediately after saving the house deposit, plans are then in place to set aside all surplus money for retirement investment funds.

These achievements are incredible, considering the person's nett income is $60,000!! It will take commitment, however with the assistance of Premier Spending Planners, who offer 3, 6 or 12-month coaching programs to keep people accountable to their goals, and who successfully show people how to navigate around all of life's unpredictable expenses, this person is assured of succeeding with their goals!

$35,000 House Deposit Savings by August 2023

 

Eliminate Financial Stress Without Having to Access Your Super!

 

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