Superannuation: Early Access for Financial Hardship and Compassionate Grounds
Superannuation is designed to fund your retirement, but there are specific situations where early access to your super may be permitted under strict conditions. These include severe financial hardship or compassionate grounds. It's essential to understand the eligibility criteria, application process, and potential implications before applying.
Conditions for Early Access
Severe Financial Hardship
Eligibility Requirements: You must have been receiving an income support payment from Centrelink or the Department of Veterans Affairs DVA for at least 26 consecutive weeks. Demonstrate to your super fund that you cannot meet reasonable and immediate family living expenses. For those aged between preservation age plus 39 weeks, you must not be gainfully employed and have received cumulative income support payments for at least 39 weeks.
How to Apply: Submit your funds-specific forms along with evidence of living expenses you are unable to meet. Provide confirmation of income support payments obtained from Centrelink or DVA.
Payment Options: Access a lump sum between $1,000 and $10,000 before tax in any 12-month period. If your balance is below $1,000, you can access the entire amount.
Compassionate Grounds
Eligibility Requirements: You may apply to access your super for specific unpaid expenses, such as: Medical treatment or transport for life-threatening illnesses or chronic pain. Preventing foreclosure or the forced sale of your family home. Modifications to your home or vehicle due to severe disability. Funeral expenses for a dependent. The expense must be unpaid, and you must demonstrate no other means to cover it e.g., savings, loans.
How to Apply: Apply directly to the Australian Taxation Office ATO via your myGov account or paper form. Provide documentary evidence such as medical certificates or overdue notices for loan or utility payments.
Payment Options: Access amounts specific to the claimed expense, such as three months of loan repayments and 12 months of interest for mortgage arrears.
Taxation and Social Security Implications
Tax Payable on Withdrawals: Severe Financial Hardship: Taxable components are taxed at your marginal tax rate, with a maximum of 20% plus Medicare levy for those under 60. Compassionate Grounds: Tax is withheld before payment and depends on your age and the tax-free or taxable components.
Impact on Social Security Entitlements: You must notify Centrelink or DVA of any lump sum withdrawal within 14 days. Super withdrawals may affect eligibility for payments such as JobSeeker or Youth Allowance, especially if the funds are not spent immediately.
Factors to Consider Before Applying
Impact on Retirement Savings: Early access reduces your retirement balance and potential investment growth. Ongoing Insurance Coverage: Maintaining a sufficient balance is necessary to cover premiums for insurance held within super. Alternative Options: Explore all available financial assistance or repayment options before applying for early access.
Contact us today to ensure your financial decisions align with your goals and secure your retirement savings effectively.
