Superannuation is Australia’s system through which individuals can save money for retirement. Because the system is explicitly designed to provide for Australians once they either stop working or become unable to work (due to age or physical incapacity), it has quite a strict set of rules in place regarding how and when you’re allowed to access your super.
According to the Australian Taxation Office (ATO), the rules governing the release of one’s super savings, collectively referred to as ‘conditions of release’, fall into one of two categories: common conditions of release, and special conditions of release. You will generally only need to satisfy one condition of release to gain access to some or all of your super, however you may satisfy multiple conditions simultaneously depending on your circumstances.
With the fallout from the coronavirus pandemic costing thousands of people their jobs, the Government has also announced a new, temporary condition of release for those who have been affected financially.
We’ve drawn up a summary of each condition of release (both common and special), along with an overview of how they work and what circumstances they’re typically designed for.
What are ‘common’ conditions of release for super?
Common conditions of release are the more ‘everyday’ conditions to be met in order for someone to gain access to their super. They generally align with superannuation’s intended purpose – to provide an income for Australians who have retired or otherwise ceased working. They are also generally contingent on age and/or employment status.
According to the ATO, the most common conditions of release for super are:
- reaching your preservation age and retiring – this only applies if you have retired from paid employment and have no intention to go back to work in the future
- reaching your preservation and beginning a transition-to-retirement income stream – this condition of release allows access to part of your super as a regular payment rather than a lump sum
- ceasing an employment arrangement on or after the age of 60 – the latest possible preservation age is 60, so if you quit a job upon or after turning 60, you will be eligible to cash in any super benefits accumulated up until that point. Note that if you continue on in a separate job, you will not be able to cash any benefits you accumulate from that point onwards until you satisfy another condition of release.
- reaching 65 years of age, regardless of your employment status – at the age of 65 you are allowed to access your super, regardless of whether you’ve retired or not
- your death – in which case your super would go to your dependents or nominated beneficiary
Under a common condition of release, you could potentially access your super as early as 55 depending on when you were born and your preservation age.
What are ‘special’ conditions of release for super?
Special conditions of release for super are those that may allow for access to your super in situations where you are either temporarily or permanently unable to work, or are experiencing severe financial or medical hardship. Another special condition of release is designed for those looking to buy their first home, however this is quite different to the other special conditions of release as it only applies to extra savings you have put away in super and not the minimum ‘super guarantee’ contributions your employer makes on your behalf.
They are referred to as ‘special’ conditions because they generally do not align with super’s intended purpose, and are only applicable in ‘special’ circumstances.
According to the ATO, the special conditions of release for super are:
- Coronavirus-related financial hardship – starting from mid-April 2020, you will be able to apply to access up to $10,000 of your super in the 2019-20 financial year and a further $10,000 in 2020-21 if you either:
- are unemployed
- are eligible for certain types of welfare, including youth allowance and parenting payments
- were made redundant on or after 1 January 2020
- had your working hours (or turnover as a sole trader) reduced by 20% or more after 1 January 2020
- had your business suspended as a sole trader
The withdrawn amounts will be tax-free, and will not affect any welfare payments you are already receiving, the ATO says.
- Ceasing employment with an employer who had contributed to your super fund – in which case your super can be accessed, but as a lifetime pension or annuity, not a lump sum. The ATO emphasises that you can only access your super under this special condition if your super fund’s rules allow it.
- Permanent incapacity – where you become unemployed and are unlikely to engage in any future paid employment due to ill health
- Temporary incapacity – under this condition you must stop working due to physical or mental ill health but will most likely return to paid employment in the future
- Severe financial hardship – if you are unable to meet “reasonable and immediate family living expenses” such as grocery or utility bill costs and have been receiving government income support payments for a continuous period of 26 weeks, you can apply to access between $1,000 and $10,000 from your super to meet these costs
- Compassionate grounds – you may be eligible for early access to your super on compassionate grounds if you do not have the financial capacity to meet certain types of expenses, including:
- medical treatment and medical transport for you or your dependant, potentially including in vitro fertilisation (IVF)
- making a payment on a home loan or council rates so you don’t lose your home
- modifying your home or vehicle or buying disability aids to cater for the severe disability of you or your dependant
- palliative care for you or your dependant
- expenses associated with the death, funeral or burial of your dependant
If your super fund allows it, you may be able to access the amount required to pay the expense as a lump sum.
- Terminal medical condition – if you are diagnosed with a terminal medical condition and two medical professionals verify that you are likely to die as a result of the diagnosed condition within the next two years, you will be allowed to withdraw your super in full as a tax-free lump sum
- First home super saver scheme – if you are planning on buying your first home, you can apply to withdraw any voluntary concessional or non-concessional payments you’ve made since 1 July 2017, along with any interest or investment earnings they’ve made. The amount withdrawn must be used for the purposes of buying your first home.
What are my options for withdrawing my super?
The ATO advises that once you’ve satisfied a condition of release, you will generally be able to receive your super as a super income stream, a super lump sum or a combination of both.
The withdrawal options available to you will depend on your fund’s governing rules and which specific condition of release you have satisfied. Regardless of how you withdraw your super, it will be paid into the bank account your super fund has on record as belonging to you.
It could also be worth bearing in mind that the ATO says its rules on how any super you access will be treated for tax purposes will depend on which condition of release applies.
Are there any rules on what you can do with your super once you’ve got it?
Generally speaking, once you have withdrawn some or all of your super under a common condition of release, there are no rules or limits regarding what you can spend it on or do with it. However, for some special conditions of release, such as buying your first home, paying a bill or for certain compassionate grounds, the amount you withdraw must be put towards the relevant purpose in question.
Can I choose not to access my super once it’s available to me?
There is no strict law dictating that you must access your super upon meeting a condition of release, such as reaching your preservation age. Depending on your personal circumstances, you may decide that you want to keep working, or that you simply do not need to access your super just yet.
Alternatively, if you don’t want to access all of your super, you could decide to withdraw some of it as a lump sum, or as a super income stream. This way, some or even most of your super could be left untouched and continue to earn interest and investment returns.
If you’re hoping to leave your super invested with a fund for as long as possible and want to ensure you’re with a provider and product that suits your needs, you can compare some of your options with Canstar.
If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.
Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group you selected.