When is it possible to get early access to my super?

2018-03-30
Getting early access to some of your super is often harder than you think Getting early access to some of your super is often harder than you think

Need to get early access to some of your super?

Nothing starts a heated conversation between mates at a BBQ quicker than a question about superannuation and whether you should be allowed to get access to it before you retire.

The government's stated purpose behind our national compulsory super savings plan is to provide people income in retirement to substitute (or supplement) the Age Pension. This is known as the sole purpose test.

Jump Ahead

When life gets in the way

So what happens when someone is faced with a financial or medical disaster before they reach their retirement age? What are the rules for requesting a special exemption and gaining access to some of your super money?

For starters, early release is usually for a specified amount for a particular approved reason.

Limited circumstances

There are very limited circumstances when you can access your super savings early and are mostly related to:

  • a specific medical condition, or
  • severe financial hardship

and are assessed on compassionate grounds.

If you do qualify for an early release payment, don't expect to receive a blank cheque.

Qualifying for compassionate grounds

Acceptable compassionate grounds might include:

  • paying for medical treatment for you or one of your dependants,
  • making a payment on a home loan to stop you losing your home (not your investment property)
  • modifying your home or motor vehicle for special needs of yourself or one of your dependants due to a severe disability, or
  • paying for expenses associated with a death, funeral or burial.

The amount of super you can access on compassionate grounds is limited to what is reasonably needed and you need to remember it is paid and taxed as a normal super lump sum payment. 

In cases of terminal illness, no tax is charged.  In most compassionate ground and financial hardship cases, the taxable component of any super released early is usually taxed at a maximum rate of 20% plus Medicare Levy.

Qualifying for financial hardship

If you're in severe financial hardship, you must:

  • be unable to pay reasonable and immediate family living costs, and
  • be getting a government income support payment, and
  • have been on this payment for at least 26 weeks in a row, and
  • not get ABSTUDY, Austudy or Youth Allowance.
Note: If you get ABSTUDY, Austudy or Youth Allowance you can’t apply for early release of super, even if you’re in severe financial hardship.

Where to start?

Note: From mid 2018, the early release of superannuation benefits on compassionate grounds is managed by the ATO.

First, check if you qualify through your super fund.  Then complete their paperwork and supply any required supporting documentation. The super fund will then need to be issued a special release code by the ATO if they approve the early release of your super on compassionate grounds.

The distribution of these amounts is usually through a Centrelink Online Account linked to your personal myGov account.

Proving financial hardship due to a mortgage debt

You’ll need to provide dated and written statements from the mortgage lender on their letterhead no more than 30 days old showing;

  • the address of the home that holds the mortgage debt,
  • what the overdue amount is, and
  • confirming the lender is intending to sell your home if you don’t pay it.

It must also show:

  • the total amount for 3 months of loan repayments, and
  • the total amount for the next 12 months of loan interest

Proving compassionate needs because of a disability

You’ll need to provide a completed signed special medical report no more than 6 months old from your treating medical doctor indicating:

  • you or your dependant have a severe disability,
  • you need to make modifications to your home or car or buy disability aids,
  • the specific type of modifications or aids you need and why you need them, and
  • how they’ll help you live with the severe disability.

Proving compassionate needs because of a funeral expense

You’ll need to provide an official death certified and signed dated letter from a doctor indicating the person has died.

A special word for SMSF members

If you have a self managed super fund, and you illegally access your super early, the amount will be included in your taxable income, even if you return the super to the fund later. If you set up an SMSF for the purpose of illegally accessing your super early, you may also incur a fine of up to $340,000 and a jail term.

Being granted an early release payment from your super fund should be considered a rarity rather than a regular and frequent option, given the restrictive special situations required to qualify for its release.

When it doubt, see you, financial adviser.

Drew Browne

Drew specialises in helping people protect and provide for what matters most in their lives. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His company Sapience Financial and Investment Services is committed to using business solutions for good in the community, and in 2015 certified as a B Corp. In 2017 Drew was recognised in the inaugural Australian Westpac Businesses of Tomorrow national awards. Drew writes for successful Small Business Owners and Entrepreneurs at Smallville, his blogs can be read on Amazon.com and you can connect with him on LinkedIn.

drew browne pic

Drew Browne

Sapience Founder & Director.
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