The bushfire season followed by the impact of COVID-19 has meant that the last 12 months have been hard-hitting for most Australians. No matter where you are geographically located, every single one of us has felt the repercussions of this natural disaster and the global pandemic. While we are seemingly out of the water now, this blog will look at one of the government measures to aid Australians during the past twelve months. Earlier this year, the federal government announced that there would be special allowances to take out superannuation funds early, both for the 2019-2020 tax year, and the 2020-2021 tax year. Thousands of Australians did, but to what cost? This blog will look at whether withdrawing your super early puts your TPD Insurance at risk.

When Can You Access Your Super Early?

Normally, accessing your superannuation early isn’t an easy task. In fact, the ATO website specifically declares that it is normally only available in limited circumstances. Normally, these include:

  • Severe financial hardship
  • Terminal medical condition
  • Temporary incapacity (disability or injury)
  • The super account balance is less than $200
  • First home super saver scheme
  • Compassionate grounds (trauma or crisis).

But, 2020 changed all of this, with the announcement that citizens, residents, and in some cases, temporary residents, all could withdraw up to $10,000 for the 2019-2020 tax year if they were eligible to do so. Further, citizens and residents could withdraw another $10,000 if they needed under the 2020-2021 tax year. It is completely understandable why so many Australians and residents wanted to rebuild their lives now and withdraw some of their super early. But was it worth that risk when looking at how it affects your insurance?

Why Is Withdrawing Your Super Early a Risky Idea?

Your superannuation is supposed to last you through your retirement, so any early withdrawal is a risk for you later in life. However, given the current financial hardship many Australians find themselves in, it makes sense for many to withdraw a small amount. What is important to consider when this happens is will you still have the same insurance and protection should something go wrong? While it is possible to build up your superannuation balance again, it is worth mentioning that your super builds up over time because of compounded investment. What is $10,000 now, could be $100,000 when you eventually retire. Plus, you should look at any insurance that could be impacted. If you happen to withdraw too much of your funds so that you can’t pay your premiums, it could affect any insurance you have currently taken out. 

While it is totally reasonable that during this time withdrawing your Super is tempting. However, as with any financial decision, it’s important to consider the impact of such a decision, both in the short and long-term.