The federal government recently announced temporary early access to your super fund for a limited time. Though it is in two instalments of $10,000 and there is a confusing eligibility criterion, everyone can access it easily. I and my wife had our first instalment out recently.
Superannuation funds are forced savings created by the government to help you after retirement. The government rarely allows early access of super fund. Thanks to the pandemic, at least you get access to the super fund.
The news is pretty old and most might have known about it already. But here is my view on it and how it can help your home renovation/construction project. As I am a construction expert and not from the finance department, you need to take everything with a pinch of salt.
Financial experts keep advising against touching your super fund. Is it really worth to wait 20 more years to get hands-on your super? Is it worth investing the money into your home? Come let’s find answers.
COVID-19 early access to Superannuation fund:
One of the many financial aids that have been flowing in due to the COVID-19 pandemic is the temporary early access to the Superannuation fund. Both the permanent and temporary of Australia and New Zealand residents are eligible.
While it is definitely going to help people, who lost their job or had their business shut, many are planning other uses for the same. Investing in property is wise if you do it right. More on that after going through the process of getting your super fund out.
The temporary early access comes in two instalments of $10,000. Once for the financial year 2019-2020 which you have to apply before 30th June 2020. You can apply between July 1st to September 24th to get the rest $10,000 for the upcoming 2020-2021.
There is more to it. You are not required to pay any tax for the amount withdrawn from the super and the application process is totally free. So, if you get an email or phone asking to pay for COVID-19 early access, you can be sure it isn’t legit.
Eligibility to access super fund:
The eligibility criterion is where most get confused. Don’t worry we have got it simplified for you. The criteria are going to be different for permanent residents and temporary residents.
Permanent residents and citizen of Australia and New Zealand
You need to fulfil at least one of the three conditions:
- You are eligible for any of these benefit schemes.
- Jobseeker payment
- Youth Allowance for Jobseekers
- Parenting payments
- Special benefit
- Farm Household Allowance.
- Met this condition on or after January 1st 2020
- You were made redundant
- Working hours reduced by 20% or greater.
- Your sole ownership business was suspended or facing a reduction of 20% or more in turnover.
If you are a temporary resident you must be rushing to get your COVID-19 super early release. Because you can only avail it for the 2019-2020 year. Yes, that means you have to act fast and apply on or before June 30th 2020.
You need to be under one or more of the circumstances listed below:
- Hold a student visa for more than 12 months and unable to meet immediate living expenses.
- Have a temporary skilled worker visa, employed and yet unable to meet immediate living expenses.
- Temporary Visa holder other than the above two and unable to meet immediate living expenses.
If your Temporary VISA has expired during the COVID-19 period you can make use of the Departing Australia Super Payment (DASP) for returning to your country.
How to apply for COVID-19 early super access?
The application process is carried over at ATO online services with myGOV. So, you require a myGov account to apply for the early access of superannuation fund.
Things you need to know before applying for the superannuation early access.
- Know your current super balance before applying. Because applying for higher values will lead to application rejection.
- You can only apply once per financial year under the COVID-19 early access scheme. That is, once before June 30th and once after. Even if you don’t apply for the full $10,000 the first time you don’t have a chance of applying again. So, decide well in advance before filing your application.
- You can apply under the COVID-19 early access even if you have accessed your super the same year under any other scheme.
- You can apply for a total of $10,000 from more than on super funds. If you have two super funds you can access $7,000 from one and $3,000 from other by applying once.
- Check your insurances linked with the super fund. You might lose it based on the left-out balance after early access to super.
- You are required to have your Australian bank account to withdraw super. There is no way around it.
- If you are super is with the State-administered fund, Self-Managed Superannuation Fund (SMSF) or Exempt Public Sector Super Scheme (EPSSS), make sure they allow early access before applying.
- For ATO-held super, you need to move it to super fund first before applying under the COVID-19 scheme.
You won’t be able to change information like contact details and bank account information. So double-check on those before submitting your application.
The COVID-19 early super access application process:
- Create a myGov account and link to the Australian Taxation Office (ATO).
- You will find the application available within the portal.
- Apart from entering the required information, you will have to answer a few questions regarding your current state which will be a deciding factor for application approval.
Once your application is approved your super fund will reach your account within 5 days. The time taken for early super access application approval is also quick.
Can I get early access to super fund?
I know the application process seems overwhelming. In reality, it isn’t that hard.
I went through the application process myself. I and my wife applied for the early access of super fund and have got it credited in our bank account. It was a usual application process followed by a series of multiple-choice questions answered.
In my opinion, most of us are eligible for early access. I am no expert in this field, but if you require money just give it a try.
Now that we know everything about how to get your super fund during the pandemic, let’s discuss should you access it right now and what should you use it for.
Should you spend your super fund for home improvement?
Let me start by taking my scenario as a case study. As I already said we (me and my wife) got early access to our super fund for the year 2019-2020. We are planning to spend it on the new home that we are in the process of construction right now.
For those wondering why to take the extra money when I have everything planned and going right, here is my answer. Though I take some of the important roles in the construction process, there is still a lot that needs to be paid.
This additional $40,000 (20,000 from each of us) can allow room for some significant additions like the addition of swimming pool or upgrading the finishes to luxury ones. There is a possibility of improvising on something that might add value to the house for the years to come.
I am no financial expert, but with my experience in the construction field, money spent on construction can make returns, either directly or indirectly which is why I would like to count it as an investment.
Not just for investment properties, even for your own residences, the $20,000 budget can make a lot of difference.
What are the consequences of accessing the super before retirement?
I know there are a lot of debates going on already especially involving financial experts. They claim ‘a wholesome amount of $20,000 withdrawn from the super fund by a 25-year-old could contribute to $64,000 during their retirement. So, it is not wise to access it right now for depreciating goods like cars and big-screen TVs.’
I agree to most of it. But my argument is that you should see spending on your home is an investment. Even a small expense of $5,000 can boost your home’s market value by a significant amount. Or it might help you materialize a home extension project you were thinking for a long time.
After all, home is one of the biggest investments that most of us make in our lifetime.
I suggest now is the right time to do all kinds of home improvement work. Here is why.
Why is this the right time to do home improvement work?
With all due respect, with everything going around the pandemic right now, I wouldn’t say now is the best time for construction work. It is ideal to do home improvement work if you are in the thought of it.
Firstly, there are a lot of grants, concessions and rebate schemes that you can make use of right now. The most important of which is the Homebuilder scheme that has announced $25,000 grants for building or substantial renovations.
Banks have lowered their interest rates on loans to encourage loaning during the pandemic situation. Do not consider loaning and starting a home renovation work unless your income is guaranteed to continue.
The pandemic economic fall is said to be one of the worst in decades. It has led to slow down in every industry including construction. Taking up any construction work now is going to provide more employment opportunities for construction workers.
You can choose to do your home renovation work within the super fund alone or you can make use of other schemes and loans to even build your new home. Are you wondering what can $20,000 get you in 2020? Here you go.
What home improvement work can you do with $20,000?
For those planning to do home improvement work only with the $20,000 from the super fund, you still have plenty to choose. You can simply spend all the cash on a bathroom renovation and make dramatic changes. Or you can do a cosmetic overhaul for the weathered aspects of the home alone.
The options are literally endless. Be it your residence, rental property or investment property, even $5,000 spent on the right things can boost home value more than itself.
So here are some of the best home improvements ideas for you within the $20,000 budget.
- Transform the aesthetics (paints, tiles, finishes) of the house with $20,000 in just 5 days.
- Target on the home renovation areas that improve the market value of the house. This approach is generally used for investment properties only.
- A complete Kitchen or Bathroom renovation can be fit in the 20k budget easily. Or you can try and renovate both within the same cost. In that case, you will have to do simpler work like painting and tiling by yourself.
- Spend on one particular aspect of the house like painting the exteriors, upgrading the living room, etc.
- Spend on one luxury product like Sunken baths which starts at $10,000.
- Or you can target on improving the home security by adding high-end security cameras.
Check out our full article on what you can get out of $20,000 for a better idea.
In my opinion, accessing the superfund is not the difficult part. Spending it the right way that will count as an investment is important. So, take your time planning and setting up everything.
It is okay if you already got your early access to super. The money can wait in the bank while you are working out the renovation plan that will add value to your home.
To remind you again, the advice regarding accessing your super fund is purely my opinion. An opinion from an experienced guy in the building industry and not from finance.
Until next time, see ya! Stay safe!