Accessing your super early

Accessing your super before retirement

In general, your superannuation is locked away until retirement.  You can access it when:

• You reach your preservation age (55 for people born before 1 July 1960) and retire
• You reach your preservation age and begin a transition to retirement income stream
• You turn 65 (even if you have not retired)

However, there are limited circumstances where an early release of your super benefits may be allowed, such as:

• Severe financial hardship
• Certain compassionate grounds
• A terminal medical condition
• Permanent or temporary incapacity
• A temporary resident leaving Australia permanently (not discussed in this article)

You should be aware that any early release of your super may incur fees and may also be taxed.  However, early release in the above circumstances could provide financial relief when other avenues have been exhausted.

Severe financial hardship

To access your super early under this condition, the requirements are:

• You have been receiving certain Australian government income support payments for at least 26 weeks continuously; and
• The trustee of your fund is satisfied you cannot meet your reasonable and immediate living expenses.

If your superfund trustee agrees to release your super early, they must pay you in the form of a lump sum, which must be at least $1,000 and no more than $10,000 (before tax) in a 12 month period. The funds cannot be used to cover debts that are not currently due (such as the full balance of a credit card or personal loan).

If you have reached your preservation age, you may be able to access your entire super benefit provided you have been receiving certain Australian government income support for at least 39 weeks.

There are administrative requirements that must be satisfied if you wish to claim a lump sum from your super benefits under the severe financial hardship condition.

Compassionate grounds

Early release of super benefits can be requested on compassionate grounds, such as in the event of life threatening illness, to stop the bank selling your home if you are behind on mortgage payments, payment of medical costs, palliative care costs and funeral expenses for a dependent. 

Your fund may not permit early release of benefits on compassionate grounds and should be contacted first to determine whether this is allowed under the rules of the fund.  If your fund does allow it, you must then apply to the Department of Human Services (DHS), whose role is to approve the request if it satisfies the requirements.

Your super fund trustee will require a letter from the DHS approving your application before they can release your super to you. 

Terminal medical condition

There are high thresholds to be met for this condition.  Where available, you will be able to withdraw your super early and free of tax.

‘Terminal medical condition’ has a defined meaning under super laws.  Accessing your super early under this condition requires that you obtain certification from two medical practitioners about your illness or injury.

Temporary and permanent incapacity

If the trustee of your super fund is satisfied that you are permanently incapacitated, and will not be able to work in a job you are qualified for, you may be able to access your preserved super benefits early.

A temporary incapacity is often able to be covered by insurance within your super fund and may provide for income support payments up to certain financial limits, for a fixed period of time.

Things to think about before applying for early release of your super

1. Less super will be available to you in retirement, or if you face another period of financial hardship
2. Funds in super accounts are generally protected from creditors.When received early by you they may lose this protection
3. There have been some illegal schemes to access super early where promoters have exploited people in financial hardship by charging excessive fees
4. Your super fund may charge a fee and other costs for making the funds available early
5. Super released early is generally taxable to you

Early access to your super benefits may be of assistance during difficult times, however should only be considered for legitimate reasons.   Where the conditions of release are not met, you may fail to secure release of your super or incur harsh penalties in extracting your super early from an SMSF.

Disclaimer

Please note that Baumgartners are not licensed financial advisers and nothing in this article should be construed as financial advice.  This article contains general information only and we recommend you contact your licensed financial adviser should you have any questions about the early release of your super benefits.