Accessing your super before retirement
Ever get yourself in a financial spot of trouble and thought about taking money out of super to help? Well, generally speaking you can’t unless you’re retired but there are some limited instances where you can. They are limited to severe situations and you can’t just access the cash because you need a new car or the kitchen appliances need to be replaced.
There are two ‘conditions of release’ (technical term for eligibility criteria to be able to access your super) for members to utilise under extenuating circumstances prior to retirement.
Severe Financial Hardship:
The first condition of release is Severe Financial Hardship. The rules around this condition of release vary depending on whether the member has reached their preservation age.
If the member has met the preservation age plus 39 weeks then they need to supply a letter from a government department showing the following:
• At least 39 weeks of Government income support (like Newstart allowance) from the date the member met preservation age.
• The member was not gainfully employed on any level on the date of the severe financial hardship application, and;
• Evidence that the member cannot meet any reasonable and immediate living expenses; like you have missed your mortgage payments, can’t pay your electricity bill, however missing your repayment on your Ferrari won’t cut it.
If the client is younger than preservation age then the government department letter must show at least 26 weeks of government income support and evidence the member cannot meet their living expenses.
The amount that will be released also depends on whether the member has met their preservation age. The member can take their full balance if they meet the above criteria and are over their preservation age. If the member is under, then they can only withdraw between $1,000 and $10,000 in any 12 month period.
Compassionate Grounds:
The second condition of release is called Compassionate Grounds. Applications for this condition of release must be submitted to the Department of Health Services, as this condition applies to health related issues. SIS Reg 6.19A outlines what expenses they will release funds for:
• Medical Treatment or transport;
• To prevent bank foreclosure or sale of the member’s principle residence;
• To Modify the members principle residence or vehicle to accommodate a disability; or
• The pay for palliative care, death, funeral and burial expenses.
The member will need to supply evidence of these expenses to the Department of Health Services before a decision will be made. If the department comes back with a favourable outcome they will supply a letter for the trustee of the super fund stating how much can be withdrawn from the members account.
The member can apply for more than one of the above expenses at once. They will need to submit separate applications to the Department of Health Services with evidence of each expense.
These conditions are only available to members who are facing extreme circumstances.
So effectively, you have to almost be in dire straits (and I don’t mean the British rock band from the 80’s) to access super before retirement. Be warry of some providers that have touted that they can assist you to access your super early as these schemes are illegal and have been shut down in the past by ASIC however not until some clients have implemented the strategies and got themselves in trouble as trustees of their own super. Best way to look at super is that it is 100% a retirement savings plan and not an emergency or backup fund. If you’re concerned about your future and any road-bumps you may hit along the way, you may want to consider taking out insurances such as income protection or trauma cover so not to be disappointed when you cannot access your super for minor or short term issues.
If you have any concerns about your super or you want to look at personal insurances, why not give JBS a call to discuss your options.