Early access to superannuation: How to withdraw or release super?

Superannuation is a long-term investment designed to provide Australians with money to live on in their retirement. As a result, your super can’t usually be accessed until you retire and reach your ‘preservation age’, which falls between 55 and 60 depending on when you were born.

An exception to this rule occurred during the early stages of the COVID-19 pandemic, when it was possible to apply for a release of super, which would allow you to withdraw up to $20,000 in super tax-free. However, this was a temporary measure only, and the initiative ended on 31 December 2020.

While COVID-19 withdrawals from super are no longer possible, you may still be able to access your super early through several ongoing arrangements. These arrangements should not be seen as ‘loopholes to access super’ as strict conditions apply. Let’s take a look at the four key circumstances under which you may be able to gain early access to superannuation.

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1.  Access super early on compassionate grounds

The Australian Taxation Office (ATO) says you may be able to withdraw some of your super on compassionate grounds, but only if you have no other means of paying for expenses such as:

• Medical treatment and medical transport for you or your dependent.

• Palliative care for you or your dependent.

• Making a payment on a home loan to prevent foreclosure (the loss of your home) or to pay for council rates.

• Accommodating you or your dependent’s severe disability by modifying your home or vehicle.

• Expenses associated with the death, funeral or burial of your dependent.

The ATO warns that early access of super on compassionate grounds can mean paying tax on the money withdrawn. The tax rate can be as high as 22% if you are aged under 60, though from the age of 60 no tax applies.

To access super early for compassionate reasons, you will need to have your request approved by the ATO rather than your super fund. That means applying through the ATO first, and if your application is approved, it will provide your super fund with a letter of approval authorising early access to your benefit.

2.  Early access due to financial hardship

If you are struggling to get by on a very low income, it may be possible to gain early access to superannuation, but you will need to meet two strict conditions:

• You have been receiving government income support payments continuously for 26 weeks, including on the day you apply for the early release of super, and

• you aren’t able to pay what the ATO regards as reasonable living expenses for your family.

Even if both of these statements apply to you, you can only withdraw a maximum of $10,000, with a limit of one withdrawal in any 12-month period. However, if you have reached your preservation age plus 39 weeks, and you are no longer working, there are no monetary restrictions. Withdrawing super in this way can also mean paying tax on the lump sum. You can contact your super fund to access your super early on the grounds of financial hardship. You don’t need to apply to the ATO first.

3.  Accessing super if you have a terminal medical condition

If you have a terminal medical condition such as an illness or injury where you may only have 24 months to live, you can apply directly to your super fund to access your super early. You will need at least two registered medical professionals, one of which needs to be a specialist practising in the area related to the illness or injury, to back up your claim, according to the ATO. Money taken from your super as a lump sum under this condition of release can be tax-free.

4.  Accessing super early – permanent incapacity

If you can no longer work because of a physical or mental condition, it is worth contacting your super fund because you may be able to access your super early.

You will need evidence from at least two registered medical professionals to confirm your condition, and the money withdrawn from your fund can either be taken as a lump sum or through a series of payments known as an income stream. The ATO advises that this type of super withdrawal is sometimes referred to as a ‘disability super benefit‘. Tax can apply to the money paid out from super early as a result of permanent incapacity.

Can I access my super early if I can’t pay my mortgage?

The ATO states that if the lender you have your mortgage with is threatening to sell your home due to you being unable to make your repayments, or your council is threatening to sell your home due to rates arrears, you may be able to access your super early on compassionate grounds. It says you’ll only be permitted to do so if:

• The home is your primary residence.

• You’re legally responsible for the mortgage or rates payments.

• You have no other way of paying the mortgage or rates arrears, such as accessing savings or through the sale of other assets.

According to the ATO, you will generally be ineligible to access super early for mortgage assistance if you are:

• not currently in arrears on your mortgage or council rates, even if you expect to have difficulty making future repayments.

• in arrears on your mortgage or council rates, but your lender or council is not threatening to repossess or sell your home.

The ATO further advises that you can’t use this condition of early access to superannuation to repay rental arrears.

What to be mindful of when accessing super early

The ATO warns that some scammers may offer to help you access your super early by transferring your super into a self-managed super fund (SMSF). However, these types of schemes are illegal and heavy penalties can apply if you get involved. This is because the same rules around early access to super apply regardless of whether you use an APRA regulated super fund or your own self-managed super fund.

If in doubt about when you can access your super early – and any tax that may apply to payments, it can be a good idea to speak to the ATO or your super fund.

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