Financial hardship: what is it and how can you regain financial control?

If paying bills or covering essentials feels impossible, you’re not alone. Around one in four Australian households can’t raise $2,000 for an emergency. Here’s what to do, where to get help, and how to protect your finances.

If your combined outgoings (what you spend) exceed your income over time, this is called financial hardship. More to the point, financial hardship is where these outgoings – no matter how much you pare them back – simply cannot be reduced to the level of your income.

Most people in this position go through a difficult process of trial and error, before realising that they are indeed in financial hardship.

How to spot financial hardship

Financial hardship doesn’t always hit suddenly—it can creep up. You might be in trouble if you often pay bills late, max out your credit cards, rely on payday loans or buy-now-pay-later schemes, or borrow repeatedly from friends and family. Even cutting back on essentials like groceries or medicine just to cover minimum payments is a red flag.

Common signs can include:

• Late or missed payments – even one late bill can hurt your credit score and trigger fees.

• Maxed-out credit cards – when your spending limit is gone, it’s a red flag.

• Relying on payday loans or BNPL – these short-term fixes can make debt spiral.

• Borrowing from friends or family – constant reliance signals income isn’t covering expenses.

Common causes of financial hardship include unexpected medical bills from illness or injury, job loss or reduced hours, major life events such as divorce or bereavement, and natural disasters like floods or bushfires.

Hardship can also affect people beyond just income issues. Regulators now recognise that vulnerability may come from living in remote areas with fewer services, limited English proficiency or low financial literacy, disability or chronic illness, or dependence on irregular or seasonal income.

If several of these signs ring true, it’s time to act. Don’t wait for debt or stress to pile up—early help can prevent bigger problems.

How can I manage my finances if I’m experiencing financial hardship?

Managing your finances during hardship can feel overwhelming, but taking structured steps can reduce stress and prevent debt from snowballing. Start by understanding your situation, reaching out for help, and negotiating with lenders or service providers to make your payments more manageable. Here’s a clear roadmap:

• Seek professional help early: Contact a financial counsellor to get free, personalised advice. The National Debt Helpline (1800 007 007) can connect you with local support and explain your rights. Early guidance can stop small problems from becoming bigger financial headaches.

• Talk to your bank or lender: Don’t wait for letters or fees to pile up. Ask for a financial hardship arrangement. Possible options include deferring payments, reducing repayments, switching to interest-only payments, or having fees waived. Under the 2025 Banking Code of Practice, banks must make these processes accessible, including offering interpreters and assistance for vulnerable or rural customers.

• Escalate if necessary: If your lender doesn’t respond or rejects your request, you can approach the Australian Financial Complaints Authority (AFCA). This independent service resolves disputes for free and ensures your rights are protected.

• Prioritise your debts wisely: Focus first on secured debts like your home loan, followed by essential bills such as electricity, water, and council rates. After that, attend to unsecured debts like credit cards or personal loans, and finally any money owed to family or friends. This approach reduces the risk of losing essential assets.

• Use utility and government support: Contact energy and water providers for bill smoothing, a method used by providers which spreads payments into smaller, predictable amounts. Centrelink also offers crisis support and hardship payments to help cover urgent living expenses.

• Know your protections: Energy retailers must now help hardship customers access the most suitable offers without worsening their financial position. Telcos must offer at least six support options and cannot disconnect your service while a hardship arrangement is active.

Keep a clear record of all your communications and agreements with lenders and providers. Staying organised ensures you can track progress, avoid misunderstandings, and get the full benefit of any hardship arrangements.

Can I access my superannuation if I am in financial hardship?

You may be able to access your super if you cannot meet reasonable and immediate living expenses and have received government income support for at least 26 continuous weeks. Eligible expenses include overdue rent, mortgage payments, unpaid bills, vehicle repairs, and medical costs. Future credit repayments or other debts do not qualify.

To apply, contact your super fund with proof from Centrelink that you meet the income support requirement. If your application is approved, you can withdraw between $1,000 and $10,000 once in any 12-month period.

If you are under 60, your super withdrawal will usually be taxed between 17 and 22 percent depending on your income. Plan carefully and only withdraw what you need, because accessing super early reduces your retirement savings. This is a legal option for genuine financial hardship, and it can provide immediate relief while you stabilise your finances.

Criteria for superannuation relief

Accessing your super to manage financial hardship isn’t automatic. You need to meet specific requirements to qualify. These rules ensure that superannuation, your long-term retirement savings, is only accessed in genuine hardship situations. Here’s what you need to meet:

• Unable to meet immediate living expenses: You must be struggling to cover essential costs such as rent, mortgage repayments, utility bills, groceries, medical expenses, or vehicle repairs. Super cannot be used for future debt repayments or discretionary spending.

• Receiving government income support continuously for 26 weeks: This applies to payments from Centrelink such as JobSeeker or Parenting Payment. You must provide official proof showing continuous receipt over the required period. Certain student payments like ABSTUDY, Austudy, and Youth Allowance are excluded.

• Proof to your super fund: You must provide a letter or documentation from Centrelink confirming your income support status. Your super fund uses this evidence to verify that you meet the hardship criteria.

• Age below preservation age: You must not have reached your preservation age (currently between 55 and 60 depending on birth year) to access super under financial hardship rules. This ensures the funds are accessed only when truly needed.

• Withdrawal limits: If approved, you can access between $1,000 and $10,000 in a 12-month period. Tax applies if you are under 60, usually between 17–22%, depending on your total income.

Only withdraw the amount you need to cover immediate expenses. Super is intended for retirement, so careful planning now prevents long-term financial setbacks.

Reclaim your financial future

With the right help, it is possible to recover from financial hardship. Act early, address the causes of your hardship, and prioritise essential payments. Tracking spending and staying on top of bills can prevent further debt and give you control over your finances.

Small, consistent actions now can make a big difference later. Compare your options today, whether it’s a bank, energy provider, or super fund, and take action before problems escalate.