Difficult financial days may come unexpectedly. What if, one day, you have no choice but to apply for early access to your super? Will your reason be adequate for the advanced release of your super fund?
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There are prescribed guidelines on withdrawing super funds in advance. Knowing what circumstances warrant the early withdrawal and how to go about the process can guarantee successful access.
This article will discuss the rules of early access to super, the qualifications, how to apply, and things to consider before applying for the release of super funds. It also contains pertinent procedures and other information essential to fully understanding your super fund.
Early Access to Your Super
The purpose of super funds is to provide a regular income stream and benefits during retirement. The early release of these funds is only allowed under certain conditions.
Some of the circumstances which can warrant advance access to your super are the following:
- Access on Compassionate Grounds
When there is an urgent necessity for money because of emergencies, you may be allowed to withdraw part of your super from your superannuation account. These circumstances qualify as compassionate grounds:
- Medical treatment or medical transportations of a dependent
- Paying for a home loan so you do not lose the property
- Handling disability expenses
- Death, funeral, or burial expenses
- Having palliative care
- Access Due to Severe Financial Hardship
Your super provider is the one administering early access to your super funds due to a difficult financial situation. Typically, these conditions are covered under these provisions:
- You cannot pay for reasonable and immediate family living expenses
- You have received government income support payments for 26 weeks
The minimum amount of super contributions that can be withdrawn is $1,000, while the maximum is $10,000. If your account balance is below the minimum you can access the remaining balance after tax.
No special tax rates are imposed on the early withdrawal of super funds due to severe financial hardship. This withdrawal is considered a regular super lump sum.
- Access Due to a Terminal Medical Condition
In case you have a terminal health condition, you may be able to access your super. To prove that this illness exists and you are qualified for early withdrawal, you have to meet these qualifications:
- Two registered medical professionals have certified that you have an illness or injury that is likely to cause death within 24 months from the date of signing the certificate
- At least one of those two practitioners is a specialist in the area related to your illness or injury
- The 24-month certification period has not expired
The super fund released under these provisions is tax-free when withdrawn within 24 months of certification.
- Access Due to Temporary Incapacity
You may access your super in advance if you are temporarily unable to work or need to work fewer hours due to physical or mental health conditions. Like the other provisions, this early withdrawal of super funds is linked to the super account.
Once granted, you will get super in regular payments for the entire duration that you are unable to work. However, they are taxed as a super income stream.
- Access Due to Permanent Incapacity
Permanent incapacity can warrant an early release of super funds. This is sometimes called a disability super benefit.
To qualify for this benefit you have to prove the existence of a permanent physical or mental condition that would likely force you to quit working. You can receive the super as a regular payment or a lump sum.
However, early access to super due to permanent incapacity has tax implications. You can apply for concessional tax treatment if at least two medical practitioners can certify your permanent incapacity.
- COVID-19 Early Release of Superannuation
Although the early release of the super program due to COVID-19 was officially closed on December 31, 2020, you can still be eligible for advance super withdrawal on other compassionate grounds.
Talk to your super provider about the alternatives that are suited to your coronavirus-related problems. Once you are allowed early withdrawal on these grounds, you need not pay any taxes. The amount is also excluded from your income tax return.
- Permanently Leaving Australia
Suppose you’re working in Australia and your employer has contributed to your super funds as an employee or sole trader within a 12-month period. Eventually, you decide to leave the country for good.
In that case you may be able to apply for the payment of super benefits. This is called departing Australia superannuation payment (DASP).
The eligibility criteria to claim your DASP include the following:
- You have accumulated super funds while working in Australia on a temporary resident visa issued under the Migration Act of 1958
- Your visa has expired or was cancelled
- You have left the country and do not hold any other active Australian visa
- You are not an Australian or New Zealand citizen or a permanent resident of Australia
Suppose you are a New Zealand citizen who wants to leave Australia permanently. In that case, you may request for the transfer of your super to your home country under the Trans-Tasman retirement savings portability scheme for individuals.
Under the said scheme, MySuper account holders or those with Self-Managed Super Funds (SMSF) may transfer retirement savings between New Zealand and Australia after emigrating from one Commonwealth country to another as a jobseeker. This transfer is voluntary among members.
As a disclaimer, the transfer of retirement savings is only allowed between the super fund provider regulated by the Australian Prudential Regulation Authority (APRA) and a New Zealand KiwiSaver scheme.
First Home Super Saver (FHSS) Scheme
Having enough bank account savings is essential to afford the cost of your dream home.
You can take advantage of the first home super saver (FHSS) scheme to boost your savings. Just apply for the release of voluntary concessional (before-tax) and voluntary non-concessional (after-tax) contributions you have made to your super account since July 1, 2017.
The Australian Government introduced the FHSS scheme in the federal budget of 2017 to 2018 to minimise pressure on housing affordability. Through this scheme, you can save money for your first home with your super account by using the concessional tax treatment of superannuation.
A maximum of $15,000 can be withdrawn from your voluntary contributions from one financial year under the FHSS scheme and up to $30,000 contributions across all years.
Be Aware of Scams and Schemes
Some people might ask you to pay for the early release of your super. If you take this step, there is a risk of experiencing illegal scams and schemes.
Examples of these unlawful actions towards super account holders include:
- Impersonation of the Australian Taxation Office (ATO), or any recognised organisation, to steal money or personal information
- Negotiating with super account holders and eventually charging for free services, like having to access the account holder’s superannuation in advance
To safeguard yourself from becoming a victim you should avoid the following when you receive a phone call, text message, or email offering help for early access to your super:
- Providing personal information
- Clicking on any links sent to your email
- Sharing your account details with anyone
Reaching Your Preservation Age
Preservation age is different from pension age. It refers to the specific age when you can access your super if you are already retired or begin the transition to receiving your retirement income stream.
For example, if you were born before July 1, 1960, you have already reached your preservation age at 55. If you were born after that date, your preservation age depends on your date of birth.
You can access your super funds once you’ve met the following conditions for release:
- You have reached your preservation age and retired
- You have reached your preservation age and started a transition to a retirement income stream while you are still employed
- You are already 65 years old, even if you have not retired yet
Other circumstances which would allow early access to your super are mentioned above. This table shows the preservation age based on the date of birth:
|Date of Birth||Preservation Age|
|Before July 1, 1960||55|
|July 1, 1960 – June 30, 1961||56|
|July 1, 1961 – June 30, 1962||57|
|July 1, 1962 – June 30, 1963||58|
|July 1, 1963 – June 30, 1964||59|
|From July 1, 1964||60|
Who Can Access their Super Early
Superannuation is designed to help individuals save for their retirement. As a general rule, members can access their super once they turn 65 or reach the preservation age of 55 to 60 years old and retire.
To recap, here are the circumstances that allow the early withdrawal of super funds:
- Compassionate grounds
- Severe financial hardship
- Terminal medical condition
- Temporary incapacity
- Permanent incapacity
- Early access due to COVID-19
- Permanently leaving Australia
When You Can Get Your Super
Withdrawal of super funds is subject to certain conditions in the company’s fact sheet or relevant product disclosure statements to protect the entitlements of members.
The benefits that come with superannuation are generally preserved until the specific conditions for release are met. You can check the remaining balance in your super benefits on your annual super balance statement.
If your super is less than $200, you may be able to withdraw it if your employment is terminated.
Keep in mind that the conditions of release cover a wide range of circumstances when early access is allowed, even if you are not permanently retired.
If you get a defined-benefit fund, your superannuation is computed using a formula that considers the length of employment and salary history.
Things to Consider Before
Accessing Your Super Early
Accessing your superannuation fund earlier than your preservation age or retirement may be the right decision to make if your current circumstance calls for it. However, you have to consider some things to avoid compromising other matters in the effort of solving one problem.
These factors are the three essential things to consider carefully before accessing your super:
- The Australian Taxation Office will only allow early access for struggling members to buy food, pay rent, and meet mortgage repayments. You may consider applying first for government support, like a stimulus package, before accessing your super due to financial hardships.
- If you are near retirement, it may be harder to build your super funds back. This could pose a long-term problem after retirement when your remaining superannuation funds are low.
- Withdrawing your super funds may affect your income protection insurance cover and life-total permanent disability cover.
How to Apply for the Early Release of Your Super
The application process for early access to super funds primarily depends on the reason of the member. The following information can guide you on how to go about the process for specific circumstances:
- Early Release Due to Financial Hardship
Severe financial hardship warrants early access to your super. However, to get the approval, you might need to show proof that you meet the income support requirements on such grounds.
Some providers with an Australian business number (ABN) may check online if you meet the conditions. Still, they need your consent or authorisation to do those checks.
You may request a letter from the Australian Taxation Office (ATO) to give to your super provider. This document can help the people who are evaluating your case carefully assess your application.
- Early Release Due to Compassionate Grounds
Suppose you are experiencing any of the circumstances that fall under compassionate grounds. In that case, you can apply for the early release of your super through the ATO website. The provider will only approve your application if you pass their evaluation and you meet the requirements.
For your application to be considered, you may need to show proof from health practitioners for medical treatment, disability, and death.
If you have received benefits through Centrelink, such as social security payments and health-related matters, you may request proof of transaction.
Centrelink delivers a range of government payments and services for retirees, people with disabilities, families, the unemployed, indigenous Australians, and students.
- Early Release Due to Other Reasons
The application for early access to your super due to other reasons will have to be forwarded to your provider during business days.
The Australian Taxation Office cannot change or review the decisions made by a super provider with an Australian Financial Services Licence (AFSL). You have to coordinate with your provider or financial adviser to address any concerns.
If you’re looking at superannuation as a key component of retirement planning, but feel like you’re lost in a maze of investing possibilities and super jargon, consulting a finance expert may be worthwhile to get you started on the right track.
Many people may be unaware of this…but just like you, 41% of Aussies intend to get financial advice rather than going it alone, according to an Australian Securities and Investments Commission (ASIC) report.
Learn how to choose the best super fund for your goals and situation by consulting with qualified finance experts like a financial adviser.
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- Australian Government, Australian Taxation Office, Early Access to Your Super, retrieved from https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/early-access-to-your-super/
- Australian Government, Australian Taxation Office, Departing Australia Superannuation Payment (DASP), retrieved from https://www.ato.gov.au/individuals/super/in-detail/temporary-residents-and-super/super-information-for-temporary-residents-departing-australia/
- Australian Government, Australian Taxation Office, Trans-Tasman Retirement Savings Portability Scheme for Individuals, retrieved from https://www.ato.gov.au/Individuals/Super/In-detail/Withdrawing-and-using-your-super/Trans-Tasman-retirement-savings-portability-scheme-for-individuals/
- Australian Government, Australian Taxation Office, First Home Super Saver Scheme, retrieved from https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/