Early access to super
We all know that our superannuation is there to provide for our financial needs in retirement. That means we can’t usually access our super until we reach preservation age and meet a condition of release.
Preservation age is between 55 and 60, depending on date of birth. It is the age at which you can access the preserved components of your super. However, if you are under 65 that access will also depend on whether you have retired, terminated an employment arrangement, or commenced a transition to retirement pension.
There are, however, several reasons why you might want or need to gain early access to your super. If you have an unrestricted non-preserved component to your super, you’re in luck. This can be withdrawn at any time. Just be aware that some tax may be payable on the withdrawal.
Beyond that, early access to super is only available if you find yourself facing really tough times. Superannuation law is quite specific as to what these are.
- Compassionate grounds, including:
- Paying for your own medical treatment or that of a dependant;
- Making a loan repayment to avoid loss of a house;
- Paying costs associated with the death of a dependant.
- Severe financial hardship. This provision is available if you have been on eligible government income support payments continuously for 26 weeks and can’t meet immediate and reasonable living expenses. The maximum payment is $10,000 and only one withdrawal is permitted in any 12-month period.
- Terminal medical condition. This requires certification by two registered medical practitioners. The benefit must be paid as a lump sum and is tax-free if withdrawal is within 24 months of certification.
- Temporary incapacity resulting from a physical or mental medical condition. The benefit comprises regular payments that are taxed as a normal super income stream.
- Permanent incapacity. This applies if it is unlikely that you will ever work again in a job you are qualified to do by education, training or experience. The benefit can be taken as an income stream or a lump sum, and is taxed according to the different tax components.
Beware of illegal early release schemes
Unfortunately, schemes offering help in gaining early access to superannuation continue to pop up. These often involve the establishment of a self-managed superannuation fund and target people who are under financial pressure and who have a poor understanding of superannuation rules.
The promoters of these schemes charge high fees before disappearing. The victims end up facing massive fines or imprisonment, and often discover that their identities have been stolen.
While applications for early release can be made directly to your superannuation fund, the best place to start is with your licensed financial planner. Aside from a helping hand at a time of major stress, your adviser will be able to identify other financial issues that may need to be addressed, including insurance claims, and eligibility for social security or assisted living.
If you find yourself in this position, or a loved one needs professional guidance in this area, contact us.