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

If you’re feeling the bite from the cost of living, or facing a big unexpected expense, you may be wondering if it’s possible to access your superannuation early. Generally speaking, you can’t touch your super until you reach your ‘preservation age’, which is between 55 and 60, depending on when you were born. There are some situations where it may be possible, but these should not be seen as ‘loopholes’, as strict conditions apply.

1.  Compassionate grounds

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.
  

• To pay arrears on a home loan to prevent foreclosure (the loss of your home).
  

• 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The ATO warns that early access of super on compassionate grounds can mean paying tax on the money withdrawn.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’re aged under 60, though from the age of 60 no tax applies.

You’ll also 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.

2.  Financial hardship

If you’re struggling to get by on a very low income, it may be possible to gain early access to superannuation. If you’re under your preservation age plus 39 weeks, you must meet two conditions:

• You’ve 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 reasonable and immediate family living expenses.

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. Withdrawing super in this way can also mean paying tax on the lump sum.

However, if you have reached your preservation age plus 39 weeks, received eligible government income support payments throughout those 39 weeks and are not gainfully employed when applying, there are no monetary restrictions and tax may only apply in certain circumstances.

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.  If you have a terminal medical condition

If you have an illness or injury where you only have a certain amount of time to live (e.g., 24 months), you can apply directly to your fund to access your super early. You’ll need at least two registered medical professionals to back up your claim, and one of them needs to be a specialist practising in the area related to the illness or injury. Money taken from your super as a lump sum this way can be tax-free.

4.  If you’re permanently incapacitated

You may be able to access your super early if you can no longer work in a job you were qualified to do (by education, training or experience) because of a permanent physical or mental condition.

You’ll need certificates from at least two registered medical professionals to qualify for this release. 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—sometimes referred to as a ‘disability super benefit’. Contact your super fund to request access due to permanent incapacity.

You may still be eligible if you meet the above criteria but are undertaking other work, such as light duties in a different position or casual work in a different field.

Your super fund may also provide you with different insurances, such as income protection insurance or total and permanent disability (TPD) insurance, which you may be able to access if you find yourself temporarily or permanently unable to work.

5. First home super saver scheme

If you’re looking to buy your first home, you may be able to access your super early through the First home super saver (FHSS) scheme to help you save for a deposit. The catch here is that you can only access voluntary contributions you’ve made yourself (including the investment earnings on these amounts). You can not withdraw funds paid into your super by your employer.

The FHSS scheme allows you to contribute $15,000 in any one financial year, up to a maximum of $50,000. As a couple, this means you could draw on a total of $100,000 plus its associated investment earnings. You’ll need to apply for a determination (permission) from the ATO in order to get access to the funds, and this must be done before the property ownership has been transferred.

Different tax rates will apply to the withdrawal depending on if your contributions were concessional (pre-tax) or non-concessional (after tax).

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

If your lender 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. 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.

Generally, you won’t be allowed to access super early for mortgage assistance if you’re:

• 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 advises that you can’t use this condition of release to repay rental arrears.

Early super access and scams: what to know

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, speak to the ATO or your super fund directly.