Are Australians spending their super unwisely?

Over 2.1 million Australians have withdrawn over $17 billion in super up to 21 June according to APRA1, and many may not be spending the money to assist with financial distress, as intended by the introduction of this scheme.

Two pieces of research show some interesting behaviours and a lack of understanding about the early access scheme and superannuation in general. Depending on who you listen to, the average withdrawal of $7,486 is either being spent on repaying debts or on alcohol and gambling.

Repaying debts

The Australian Bureau of Statistics (ABS) asked some of those making early withdrawals from their super how they will use the money:

  • 57% used or planned to use the money to pay for household bills, mortgage, rent and other debts, and
  • 36% added or planned to add it to savings2.

The first statistic supports the objective of the scheme, whereas the second does not. Using your super to top-up your savings seems contradictory, especially when you consider how much more tax-effective super is, which we’ll review below.

Spend, spend, spend

Some real-time research by credit bureau illion and consultancy AlphaBeta3 which was based on 13,000 people who accessed their superannuation since the Covid-19 outbreak, tells a different story of Australians spending it up and enjoying themselves.

Their research of spending habits over the fortnight after early release of super payments were made in mid-May, showed that people spent:

  • $2,855 more compared to their spend in the previous fortnight
  • 14% to repay personal debts
  • 22% on essentials, and
  • 64% on discretionary spending.

This discretionary spending includes spending slightly more of the $2,855 increase on gambling ($327) than grocery shopping ($320) and more on alcohol and tobacco ($157) than rent ($122).

It’s important to note these figures only relate to the increase in spending of $2,855, from their average withdrawal of around $8,000. It still leaves a question of what the remaining $5,145 will be spent on, which the ABS figures tell us is paying the mortgage and rent.

The most disappointing finding of this research was that 40% of applicants continued to be employed and were not suffering financial hardship.

Is there value in withdrawing from super?

Members making a withdrawal need to understand the true value of their withdrawal in both present and future terms.

For a recent valuation, those withdrawing in the middle of May (when the All Ordinaries was 24% below its peak in mid February4), you can say that $10,000 withdrawn in May was worth $12,400 in February 2020 and may be worth that again in the near future. They have crystallised the losses and may never regain them if spent and not reinvested.

You also need to consider future impacts. If you’re 30, that $10,000 will mean your super balance will be $25,310 less in 20 years’ time. Think how long it will take to save up enough to replace this amount of money. 

If you’re thinking about applying for early release of your super, you can check how much it may impact your super with our simple calculator.

The value of saving in super

The other interesting aspect of the ABS research was that so many were putting their money into ‘savings’.

This is somewhat contradictory as the tax-effectiveness of super makes it a far better way to save for your retirement. Let’s take a look at an example.

John is offered a $1,000 bonus for his efforts. He earns $80,000 and he’s asked if he prefers to take it through his pay as cash or put it into his super as a salary sacrifice (concessional contribution). Here are the two choices John faces and the tax he’ll pay in each situation over the course of one year:

*Excluding Medicare levy
**We’re using 3% for both investments to help you compare the tax impacts. We’re not suggesting these are current rates and they will often be different to each other depending on how you invest your money.
***Tax rate on superannuation investments is usually at a rate of 15% and may be lower. There are however caps on the contributions you can make to super and exceeding these caps will expose you to paying extra tax. Please see the ATO’s website for more information.
Assumptions: Total income from all sources will be less than $90,000 in the 2019/20 financial year. John only receives Superannuation Guarantee contributions from his employer. The concessional contributions cap for super is $25,000 per annum.


If John takes his money through his pay, he will end up with $675 after tax. Once he deposits it in a bank account, any investment returns are included as income for tax purposes and taxed at his marginal tax rate.

If John invests the money into his super as a salary sacrifice, a tax of 15% is applied upon entry to the fund which leaves him with an invested balance of $850. We’ve also assumed John takes a conservative investment approach which has an assumed investment earnings of 3%.

As you can see, John’s super investment finishes well ahead.

It’s worth remembering super is designed to provide for your retirement but can be accessed if you are experiencing severe financial hardship. Drawing on it now and crystallising losses to spend it on niceties or to add to your savings isn’t just inconsistent with the scheme’s objectives, it also makes bad financial sense.

With phase two of the scheme opening for applications on 1 July, if you’re considering accessing your super, it’s a good time to think about whether you really need the money. Our calculator will show you the real cost of withdrawing your super early.

It’s also important for you to note that the ATO has issued a strong warning that they will take action where people are deliberately exploiting the early access to super measures, so please check you’re eligible before making an application. To read more, visit our website.

For more information about super, check out Money Matters our online learning platform.

2Australian Bureau of Statistics, Household Impacts of COVID-19 Survey, 12-15 May 2020,
3Sydney Morning Herald, Super bender: retirement nest-egg withdrawals used to boost spending on non-essentials, 1 June 2020,
4ASX All Ordinaries: 20 February close: 7,255; 15 May close: 5,492.