Accessed your super early? Here’s how to rebuild your nest egg

young woman looking over her super statement

Over three million Australians have withdrawn from their superannuation since the government launched the Super Early Release Scheme to help people navigate the financial shock from COVID-19. 

This is according to new figures from the Australian Prudential Regulation Authority (APRA), which show $33.3 billion worth of super have been released prematurely as of 13 September, with an average payment of $7,676.

Under the government scheme, Aussies were able to access up to $10,000 last financial year, with another $10,000 available from 1 July to those still struggling with bills. 

But for that small bit of relief, you may be paying a huge price. Some experts warn that a $10,000 withdrawal for a young person could amount to ten times as much missing from their nest egg by the time they retire.

“People will possibly have $100,000 less in retirement,” finance and economics consultant, Pauline Taylor told the Australian Broadcasting Corporation.

What to do if you’ve accessed your super early

It’s not all bad news. 

If you’ve dipped into your super, it’s not too late to build your retirement savings back up again. There’s a step you can take to futureproof your finances and protect your nest egg: make voluntary super contributions. 

“Even small amounts of regular contributions into your super can go a long way,” director of tax refund app TaxFox, Maz Zaman says. 

“For example, a 30-year-old who contributes an extra $400 a year to their super, can potentially retire with an extra $34,000.” 

That’s because of compounding interest. This is where you earn returns not only on the money you’ve initially deposited into your super account but also on the returns themselves. 

Plus, you can claim a tax deduction on the amount you contribute, as your super balance is taxed at a rate that’s usually lower than your taxable income (15% if you earn under $250,000 a year, or 30% if you earn over $250,000 a year). 

Just bear in mind, you’re limited in the amount of voluntary contributions you can make annually:

  • If you claim a tax deduction on those contributions, they’ll count towards your concessional contributions cap, which is $25,000 per year. Other super contributions from your employer or through salary sacrifice are also included under this cap.
  • Alternatively, if you don’t claim the contributions as a tax deduction, they’ll count towards your non-concessional contributions cap, which is $100,000 per year if your total super balance is under $1.6 million at the start of the financial year.

Make sure not to exceed either cap, as otherwise you could be penalised with an extra large tax bill. Our article has further tips on how to get your super tax-ready.

Finally, it’s important to remember that while you may be using your super pay-out to stay afloat right now, there are also other financial hardship options out there that won’t endanger your future self’s finances. For a snapshot, visit our coronavirus financial guide.