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

Discussion in 'Sharemarket News & Market Analysis' started by Ozbargain, 10th Apr, 2020.

Join Australia's most dynamic and respected property investment community
  1. Ozbargain

    Ozbargain Member

    Joined:
    5th Apr, 2020
    Posts:
    7
    Location:
    Sydney
    {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?
     
    Last edited by a moderator: 10th Apr, 2020
    Empire, Erida and datto like this.
  2. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,371
    Location:
    Mt Druuiitt
    Apparently those super fund withdrawal applications are not getting checked. Just going straight through. So I wonder how many ineligible people are applying?
     
  3. Sackie

    Sackie Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    18,161
    Location:
    Bondi Beach
    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.
     
    Erida likes this.
  4. SatayKing

    SatayKing Well-Known Member

    Joined:
    20th Sep, 2017
    Posts:
    6,308
    Location:
    It's All About Me.
    Occasionally.
     
    Cia, craigc, iloveqld and 3 others like this.
  5. Ozbargain

    Ozbargain Member

    Joined:
    5th Apr, 2020
    Posts:
    7
    Location:
    Sydney
    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.
     
    Rugrat and datto like this.
  6. Gockie

    Gockie Unicycle - get exhausted but never two tired Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    12,343
    Location:
    Sydney
    My current employer only puts the super contributions in every 3 months, whereas when I was working for CBA it was every 2 weeks.
     
  7. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,371
    Location:
    Mt Druuiitt
    Maybe some time in the future the ATO may require those who claimed their super to provide evidence of hardship.
     
  8. Ardi

    Ardi Well-Known Member

    Joined:
    20th Jul, 2015
    Posts:
    300
    Location:
    Orange
    So does this mean anyone can draw 20k from super and potentially invest elsewhere, or put towards PPOR.
     
    Cia likes this.
  9. SatayKing

    SatayKing Well-Known Member

    Joined:
    20th Sep, 2017
    Posts:
    6,308
    Location:
    It's All About Me.
    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.
     
  10. Islay

    Islay Well-Known Member

    Joined:
    28th Jul, 2018
    Posts:
    624
    Location:
    somewhere
    You certify that you are eligible. Would you sign an incorrect tax return? My best guess is there will be checking in the future.
     
  11. Danieljk101

    Danieljk101 Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    168
    Location:
    Sydney
    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).
     
  12. Omnidragon

    Omnidragon Well-Known Member

    Joined:
    17th Oct, 2015
    Posts:
    1,693
    Location:
    Victoria
    All my friends doing it even though they don’t need it. Not sure if that’s even allowed but prob just go through
     
  13. Silverson

    Silverson Well-Known Member

    Joined:
    11th Jun, 2016
    Posts:
    750
    Location:
    Melbourne
    @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?
     
  14. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    30,841
    Location:
    Australia wide
    This will depend on the circumstances.
     
    Silverson likes this.
  15. Blueskies

    Blueskies Well-Known Member

    Joined:
    24th Aug, 2015
    Posts:
    1,293
    Location:
    Brisbane
    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.
     
  16. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    10,110
    Location:
    Brisbane
    I heard someone today (from the financial sector, cannot recall who it was) who said drawing $10k now could mean losing $150k at time of retirement. Double that for drawing out $20k.

    Of course it comes down to age when you draw it out, and I only heard a bit of the interview, but I personally would borrow $10k to get me through a few months rather than touch my super (if I was young).
     
    HUGH72 and datto like this.
  17. itsmescottyc

    itsmescottyc Well-Known Member

    Joined:
    5th Jan, 2017
    Posts:
    110
    Location:
    Melbourne
    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?
     
  18. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    10,110
    Location:
    Brisbane
    For me, there's nothing I could invest such a small amount in that would grow so much. I'd be tempted to spend it on something that won't grow. Certainly, using it for living expenses isn't going to seen any return.

    That's why if this was me, I'd borrow $10k (if I needed that much to keep me afloat until things settle somewhat) and pay it back as quickly as I could. But we each have our own circumstances and must do what is best for us.

    If we could have taken out our super during the times when we didn't have much money, we wouldn't be very sorry now.
     
  19. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,371
    Location:
    Mt Druuiitt
    Come on, 20K can get a hot commodore. The market will love it.
     
    Cia and Gladys like this.
  20. Angel

    Angel Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    5,368
    Location:
    Paradise, Brisbane
    If someone is seriously struggling financially, how would you borrow $10k? I cant imagine Wylie going to one of those evil payday lenders.
     
    Cia likes this.