What impact will 600,000+ people withdrawing super have on the markets?

{Note from mods - this thread split from here: Short term COVID-19 opportunities in the stockmarket [ASX Shares]}




Apparently over 620,000 Aussies (up from 360,000 last week) have already registered to withdraw $20k super with reports indicating that the super industry will have to pay out $25 to $50 billion dollars in the next couple of months.

ATO will start accepting applications from 20th April so not sure if this will force super companies to sell-off shares to create liquidity. Payments will likely flow in early May. The ABC report I looked at earlier indicated the super industry currently has about $950b in cash/bonds so may be there may not be much of a sell-off except some of the smaller players.

Any thoughts?

 

Apparently those super fund withdrawal applications are not getting checked. Just going straight through. So I wonder how many ineligible people are applying?

 

Your guess is as good as mine. Probably better.

Overall my plan is long term. For the most part I'm buying stocks that if need be, I can convert a short term hold to long term.

I'd assume there's more pain to come, both in stocks and real estate. No crystal ball to know what's going to happen though.

 

Occasionally.

 

Yes noticed on the ATO website indicating no evidence is required as part of this process and you're just required to certify that you're eligible and have to keep your own records. There is no way the ATO would be able to assess 600,000+ applications in a timely manner.

No doubt there will be people who have not lost income and would like to withdraw $20k tax free.
However, not sure if ATO will still have some systems in place to flag these applications for review - e.g. if your employer super contributions have remained unchanged in recent weeks it should indicate to the system that you're not eligible.

 

My current employer only puts the super contributions in every 3 months, whereas when I was working for CBA it was every 2 weeks.

 

Maybe some time in the future the ATO may require those who claimed their super to provide evidence of hardship.

 

So does this mean anyone can draw 20k from super and potentially invest elsewhere, or put towards PPOR.

 

I don't think anybody really knows. Bear in mind some super funds can decline to allow the withdrawal or even switching to cash so what impact that will have, if applied, is yet to be seen.

For sure there are going to be some who will game the system but I'm assuming most who do apply actually need it. The long term effect on them could be adverse but if you need funds to but food, you need funds.

 

You certify that you are eligible. Would you sign an incorrect tax return? My best guess is there will be checking in the future.

 

At the end of the day it’s your money, I don’t think the ATO are going to be to strict.

IF they follow up on non compliant applications the worst they would do is put you on a payment plan to put it back into super.

My wife (stay at home mum) and myself are both going to do it. $40,000 now is better than waiting till 70 years old (we are 33 years).

 

All my friends doing it even though they don’t need it. Not sure if that’s even allowed but prob just go through

 

@Terry_w if one was to withdraw allowed amount from super, then re contribute in the same financial year the same amount or more would this be looked at as avoidance or is it ok?

 

This will depend on the circumstances.

 

To the original question of the impact on (share) markets, I think pretty minimal. The ones that will be challenged will be smaller funds with illiquid/non-publicly traded assets, especially if they haven't accurately revalued as the market has shifted.

 

What about somebody in their 30s using the 10k to invest passively outside of super?

I’d rather take it, invest it in a similar investment vehicle in my own name outside of super, and be able to access it when I want instead of having to wait until I’m in my 70s?

 

Come on, 20K can get a hot commodore. The market will love it.

 

If someone is seriously struggling financially, how would you borrow $10k? I cant imagine Wylie going to one of those evil payday lenders.