‘Not genuine’: Why 3.1 million Aussies will find it harder to get a loan

Lucy Dean
·3-min read
Pictured: Australian houses, piggy bank with Australian cash. Superannuation concept. Images: Getty
Here's how accessing your super early could affect your ability to get a home loan. Images: Getty

Australians who have tapped into their super early could find themselves on lenders’ blacklists, a mortgage broker has warned, as millions raid their retirement funds.

Around 3.1 million Australians have accessed their super, with $3.2 billion now drained from the nation’s retirement balances and now lenders are applying extra scrutiny to those looking to purchase property using those funds.

The scheme was introduced in March to help Australians in financial strife access up to $10,000 in the 2019 financial year and another $10,000 in the 2020 financial year, provided they fulfilled the eligibility criteria. However the Australian Tax Office has said it prioritised speed over eligibility checks, with many Australians now having raided their super without meeting the requirements.

Pink Finance director Nicole Cannon said the issue with the super funds is that many lenders “don’t see them as genuine savings”.

She said that while every lender is different, there are some that will simply refuse to lend to those who have tapped their super.

“That’s because technically you’re meant to be in financial hardship to access that super, so if you’ve accessed your super then under that definition for the banks you’re in financial hardship and therefore they won’t lend to you.”

Other banks are more flexible and will ask that borrowers wait a certain period of time, like a month, with that super cash in their account to prove that it hasn’t been spent and is therefore genuine savings.

“If people have accessed their super - and it’s done, there’s nothing we can do about that - we’re now recommending they have three months of that money sitting in their bank account so the banks can see that when they submit the loan that that’s genuine savings,” Cannon said.

“The lenders are very cautious with using those funds as a deposit.”

Continuing, she said this was understandable given the hefty penalties the ATO will levy against Australians who knowingly raided their super while not being eligible. Fines are as high as $25,000 for Australians who withdrew the full $20,000 - more than wiping out any benefit gained.

There’s no question that people literally were able to go in and just request their super and then there was money in their account. There was no confirmation or declaration from the individual to confirm that they actually were in financial hardship - so it’s very easy to access that money,” Cannon said.

“People thought, ‘This is a great opportunity to get a $20,000 - $40,000 deposit,’ and you know it’s a fair point because this is an opportunity for young first home buyers to purchase an asset that will increase in value over 20, 30, 40 years,” she added.

For a couple, that $40,000 invested in a home could mean avoiding renting in retirement. But on the other hand, the financial concerns associated with draining a super account can’t be ignored, she said.

Director of superannuation at HLB Mann Judd Andrew Yee issued a similar warning on Wednesday, calling on young Australians to think hard about decisions to tap into super.

“They should ensure they are familiar with how super works in practice and, as an investor, the longer the time horizon the more time they have to take advantage of market ebbs and flows,” he said.

“Investment returns have taken enough of a hit with Covid-19, so accessing a chunk of super will only exacerbate losses further. Early release of super recipients who now find themselves back at the drawing board need to act quickly to restore super balances.”

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