Early access to super not always the answer

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If you’re struggling with money, accessing your super may seem the ideal solution to your problems, however, you can’t simply withdraw what you’ve paid in.

Strict rules apply to accessing superannuation benefits and before doing so, fund members are required to satisfy a Condition of Release. If you haven’t reached 65, your preservation age, or retired permanently from the workforce, you will have to satisfy one of the following conditions before you can apply for early access to your superannuation:

  • compassionate grounds
  • severe financial hardship
  • terminal medical condition
  • temporary or permanent incapacity
  • balance of $200 or less
  • departing Australia permanently if you’re here temporarily


Compassionate grounds
In some instances, such as paying for medical treatment, making a loan payment to save you from losing your home, modifying a home or car to accommodate special needs, or paying death, funeral or burial expenses, an amount of super to cover such costs can be released. This lump sum is taxed as a normal super lump sum.

Contact the Department of Social Services to request access to your super under this condition.

Severe financial hardship
If you have been receiving eligible Government income support payments continuously for 26 weeks and are not able to meet reasonable living expenses, then you can request a lump sum withdrawal from your super fund. The minimum amount that can be requested is $1000 and the maximum $10,000 and is limited to one withdrawal in a 12-month period.

Contact your superannuation fund direct to request access to your super under this condition.

Terminal medical condition
A terminal medical condition, which will result in your death within a 24-month period, may enable you to access your super early. Two doctors must certify your condition, one of whom must be a specialist in the field related to your condition. If withdrawn within 24 months of the date of your condition being certified, the lump sum will be tax free.

Contact your superannuation fund direct to request access to your super under this condition.

Temporary or permanent incapacity
In regards to temporary incapacity, you must be unable to work or have the need to work fewer hours due to a physical or mental condition before you can apply for early access to your super. This type of super withdrawal will be paid as regular payments and will be taxed as a standard super income stream.

For those with a permanent incapacity to work, you must satisfy your fund that you will never be able to work again in a role that you are qualified to do by education, training or experience, due to a mental or physical condition. Your condition must be certified by two medical practitioners and the withdrawal can be paid as a lump sum or as regular payments. How tax is applied will depend on your circumstances and the tax liability for contributions made.

Contact your superannuation fund direct to request access to your super under these conditions.

Balance of less than $200
If you cease employment and have a balance of less than $200 in your super fund, then you may be able to withdraw this amount, tax free.

Contact your superannuation fund direct to request access to your super under this condition.

Departing Australia permanently
If you have been working in Australia as a temporary resident, then you may be able to apply to take your super with you when you depart. This is called a Departing Australia Superannuation Payment (DASP) and any application to withdraw your super should be made within six months of your departure.

For more information, visit ATO.gov.au

While you may consider that you meet one of the conditions outlined above, being granted early access to your superannuation is not guaranteed. Both super funds and the Department of Social Services apply strict criteria to the decision-making process and the reality is that you may not receive the outcome you had hoped.  Accessing superannuation early should be considered as a last resort.

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Written by Debbie McTaggart

25 Comments

Total Comments: 25
  1. 0
    0

    I was told some years ago (of course this issue is always in constant flux) that if you became unemployed and needed Centrelink assistance then you were forced to draw down on your Super first. Has that changed?

  2. 0
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    Other than raising your annual allocated pension within the limits, any supplementary
    withdrawals (commutations) of $2,000+ will generate questions from Centrelink.

  3. 0
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    If you have reached your preservation age which is 55 up to 65 depending on when you were born and sign a form stating that you are retired then your can access a substantial amount of your super tax free (around $190k). To say you are retired, you have to not be working but there is nothing stopping you from going back to work later. Neither the super fund or the tax office will ask you for the money back. Might not be the best choice, but if you’re struggling it’s an option. All the super funds have th necessary forms an details.

    • 0
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      After reaching preservation age you can access your super. In addition to your tax-free component you can access $195,000 (low rate cap) at zero tax rate; anything over is 17%. More at https://www.ato.gov.au/individuals/super/in-detail/withdrawing-and-paying-tax/withdrawing-your-super-and-paying-tax/?page=3.

      In order to access the $195,000 your fund will require you to make a declaration that you have retired and will pay to your account within days. Obviously the facts should fit else the claim could look dodgy if reviewed and found you were working up to that point and continued working afterwards. There should be no problem returning to work after declaring you retired if you are able to argue change of circumstances. Chat to your advisor or fund before acting.

    • 0
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      If you have 2 jobs one being part time or casual then if you have reached preservation age you only have to retire from one job. Many people get a casual job and quit it so that their super is no longer preserved.

    • 0
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      I have been told that a lot of people on transition to retirement pensions are doing this so that they now get a full pension and their fund doesn’t get taxed 15%.

    • 0
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      But you will NEVER again be able to contribute into super using pre tax dollars Sundays. That is as it should be.

    • 0
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      Yes Mick you can still contribute with pre tax dollars up until pension age and after if you meet the work test.

    • 0
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      Mick, OG is correct.If you return to work there is nothing stopping you from salary sacrificing into super if your workplace allows.

    • 0
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      All retirees effected by the recent pension changes should go and register for employment. A small part time job would be just the thing to replace the lost income. I intend to do so next week when school goes back and things get back to normal. My income is now $10 000 less than it would have been before and that money needs to be replaced.

    • 0
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      Congratulations, Rae. Wouldn’t it be nice if all affected swamped employment agencies and demanded work? Better still if they displaced a few hundred thousand younger folk in the workforce and increased the unemployment numbers dramatically.

    • 0
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      Disgusting Rainey the jobs belong to the younger folk. Retire gracefully and accept what you have with gratitude.

  4. 0
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    People have been allowed to use their superannuation as though it were a lolly giveaway. The whole idea of super was that it was a retirement benefit, not spending money. Some people will take their super (which they only paid 15% tax on, not the correct marginal rate), spend it and then go on the pension. That is not right.
    If you are going to allow people to manage their own super then they need to play by the rules.

    • 0
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      As long as the government plays games with our money then we too have the same prerogative. Personally I would hate to be on the pension at the whim of political generousity. However, you are right. Some people (lots) are buying a mansion and living on vapor. However, I would like to think the money I have put in super is available to me when and as I need it.

    • 0
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      Yes a lot retire when they can access their super. Travel the world, buy the tug and van etc and cross off their bucket list. When they reach pension age they have little left so get full pension.

    • 0
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      Alternatively, they lose their job before they can get the age pension, but can’t find another one. Surely, accessing some of their own super is better than struggling on Newstart in your late 50s and early 60s!

    • 0
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      There are plenty of post preservation age professionals that have decided to cease working full time rather than face the prospect of long term unemployment. Much easier to cash in the city house, make a tree change, top up the super, take the $195,000 to get them to 60 when they can access the balance tax free or commence a TTR stream and start living to tick off the bucket todo list. Sounds alright to me.

  5. 0
    0

    My super statement has a component called “unrestricted unpreserved” which can be taken in cash at anytime. Doesn’t the list in the article only apply to the preserved component?


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