Rod Myer* says new research has revealed that almost half the Australian’s who accessed their super early suffered no drop in income.
The Government’s early super access scheme has once again come under fire, after new research showed almost half of successful applicants had suffered no drop in income.
An analysis of bank transaction data by economic consultants AlphaBeta and credit bureau illion found that 38 per cent of those making early withdrawals had suffered no loss in income, while 21 per cent had actually increased their income by 10 per cent or more.
If transposed onto official figures from regulator APRA, that would mean that 885,000 people withdrew money from superannuation between July 1 and August 9 despite maintaining their income.
To be eligible for early super withdrawals, members needed to have suffered a 20 per cent drop in working hours or turnover, or be unemployed.
But they did not need to provide evidence to the ATO.
The latest figures show that the number of members making withdrawals without income drops has risen dramatically from the 40 per cent revealed in AlphaBeta’s previous analysis in June.
Members who access the scheme despite being ineligible could face prosecution, with the ATO currently investigating 400 early withdrawal claims after stopping 3000 people from taking out money.
According to APRA’s latest figures, $32.2 billion has been withdrawn from superannuation via 2.7 million applications, with members making 1.1 million repeat applications from July.
The average withdrawal has been $7689, while the maximum allowed is $20,000 over two tranches of $10,000.
More men are having a flutter
As with the first analysis, the majority of withdrawals don’t seem to have been used for emergency purposes, with 64 per cent of spending going on discretionary items like clothing, furniture, restaurants and alcohol.
Men spent 10 per cent of their withdrawals on gambling, while for women this figure was six per cent.
However, the magnitude of gambling seems to have declined, with the average gambling spend within the first two weeks of withdrawal being $284, compared to $327 in the earlier report, which covered the first tranche of withdrawals between April and June.
During the second tranche of payments, 24 per cent (22 per cent earlier) of spending was on essential items and 12 per cent was on debt repayments, compared to 14 per cent in the earlier analysis.
But debt repayments include spending on buy-now-pay-later arrangements.
Andrew Charlton, AlphaBeta director and former adviser to PM Kevin Rudd, said overall spending in dollar terms was mainly higher in the second round.
“This second tranche of super withdrawal and spending follows the same trend as the first round, but at greater levels of spending,” he said.
“While this policy was aimed as a lifeline, more than half the people that withdrew the second amount had no change in income.”
Where people had made short-term decisions to spend super early, Dr Charlton said this would “have a major impact on the retirement incomes of those who withdrew their super”.
But superannuation assistant minister Jane Hume was sceptical of the findings.
She told The New Daily that the research covering 10,000 people “represents only about 0.37 per cent of those who have made early withdrawals”.
The ATO looked at this and found that 90 per cent of applicants on the first blush were eligible for early release of super,” Senator Hume said.
“Of the remaining 10 per cent, it contacted them and found that nine out of 10 were eligible.”
Senator Hume described the research as “misleading” and said she was “very uncomfortable about some of the judgments about what is or is not appropriate expenditure”.
“They’ve included things like food delivery as discretionary spending or furniture for a home office. Are they discretionary during lockdown?”
Senator Hume also confirmed to The New Daily that October’s Budget would contain reforms to superannuation, including possible changes to the use of ‘default funds’ for workers who make no personal choice.
“That was a recommendation from both the 2018 Productivity Commission review and the Hayne financial services royal commission,” she said.
Industry Super Australia CEO Bernie Dean said AlphaBeta’s research was unsurprising.
“The industry repeatedly warned the government that the scheme’s self-assessment model would allow ineligible claims to pass through and make the system susceptible to rorting,” he said.
“This policy was intended to support those in genuine hardship, and payment to them can be slowed down by applications from people that aren’t eligible.”
“The absence of a cop on the beat just fuels criticism that this was a stimulus measure – designed to encourage some Australians to raid their retirement savings to bail out the economy.”
*Rod Myer is the YourSuper Editor at The New Daily.
This article first appeared at thenewdaily.com
