The Actuaries Institute has called on the Australian Tax Office (ATO) to play a significant role in the payment of limited, early release of superannuation to people financially impacted by the ongoing coronavirus (COVID-19) crisis.
The government announced that it will allow eligible Australians who are experiencing financial hardship due to the crisis to access up to $20,000 from their superannuation, in two tranches of $10,000 each. It is the ATO’s task to make the determination on early release. This policy is estimated to pull around $25 billion from funds, if 1.35 million Australians availed of the offer.
“There may be a need for the funds and the government to look at ways to enable early access and smooth out the ability and capacity of funds to pay,” said Tim Jenkins, the convenor of the Actuaries Institute's superannuation practice committee. “A possible solution is for the ATO, in addition to making the determination, to distribute the payments to further streamline the process to get money into the hands of those in need quickly. The ATO could then invoice the superannuation funds over the following few months to spread the cash flow impact on funds.”
Elayne Grace, Actuaries Institute chief executive, acknowledged the difficult financial decisions the government had to make to balance the short-term health and economic risks to the community against the long-term effect on retirement incomes.
“Early access to super will help ameliorate some of the short-term pressures people, their families and their communities face,” Grace said. “Some of the key issues include liquidity for funds, locking in losses for individual investors before investments have time to recover, and also, if superannuation balances fall to zero, there are issues around insurance. We know large parts of the community have insurance through their super fund. We want people to have access to their funds, to help them through very difficult times, but it is important to know and map the consequences.
“The Actuaries Institute would encourage the government to commit to restoring and maintaining the integrity of the retirement income system after the crisis ends.”