Accessing Your Super Funds
Early Access to Super
- Early access to your super is generally granted under extenuating circumstances.
- High tax rate is applicable.
Those who have been making contributions to their super funds may have these lingering questions in mind: When can I access my super, and can I access my super early? What if I need my super now for personal reasons?
In Australia, you can only access your super fund when you reach the preservation age, which starts at 55 years old, or during retirement. The preservation age is concurrent to your birth date; from July 1960 for people at 55 years of age until June 1964 onwards for those at 60 years old.
However, there are certain circumstances in which an early access to your superannuation can be granted, provided that you have met the eligibility requirements and Centrelink has approved your application.
Accessing Your Superannuation Early
One of the most common scenarios in which people want to access their super fund early is to pay-off some debts. Although this is a good reason for you to make the most out of your superannuation, it is still advisable that you have explored other options to pay off any debts before deciding to use your superannuation – the short-term benefit you are thinking might cause you a long-term disadvantage that could have a huge impact on your future.
Let’s say you want to use your super fund to pay off the overdue amount of your home loan, when in fact, you don’t have enough money to maintain that house in the long run. You will still inevitably sell your house and used up your superannuation, leaving you with nothing.
Remember that while accessing your super early at the time might sound necessary due to financial constraints, it is important to re-assess your situation and consult with a financial adviser for advice on finding a more appropriate solution.
Reasons for When You Can Access Your Super Fund with an Early Release
As stated above, there are two specific events when you can access your superannuation fund - when you turn 55 years old or if you are retiring from the workforce.
However, there are reasons or grounds that allow you to access your super fund earlier than the preservation age or retirement and you must meet the specific eligibility criteria to be have your application approved. These grounds include:
- Specified compassionate grounds: You can make a claim for an early superannuation release on one or more of the following compassionate grounds:
- Medical treatment
- Medical treatment
- Mortgage assistance
- Home or motor vehicle modifications
- Palliative care
- Funeral assistance
This is to stop the sale of your house, or to pay medical, disability, or funeral expenses.
- Severe financial Hardship: If you are experiencing financial hardship and have been receiving income support from Centrelink for at least 26 weeks, you may be able to access your super early by contacting your superannuation directly.
Transition to retirement is a government policy which enables you to have an account-based pension even while still working. There are certain requirements before you can be deemed eligible like reaching the preservation age, a minimum investment of $25,000, and more. For further details on these requirements, check with your financial adviser.
- Temporary residents: Those who live temporarily in Australia can access their super fund; however, you cannot get an early release of your super based specified compassionate grounds. Events that would make you eligible to access your super are death, terminal illness, incapacity, unclaimed money payment or if you are leaving Australia for good. Claimed benefits have a 35% tax.
- Retirement: The amount of cash you can get when leaving the working world would depend on your preservation age. Your preservation age will be concurrent to the year you were born.
|Your Birth Date||Preservation Age|
|Before July 1960||55|
|July 1960 – June1961||56|
|July 1961 – June 1962||57|
|July 1962 – June 1963||58|
|July 1963 – June 1964||59|
|After June 1964||60|
- Balance is less than $200: If you changed jobs and the contributions you have made is less than $200, then you will be granted access. Likewise is true if you have found your lost account with a balance of less than $200.
- Changed status of employment: If you have become self-employed or unemployed and have money in your account which has contributions paid before July 1, 1999, you can access it. Law has granted that payments paid in before that date does not need to be kept until the preservation age.
- Permanent disability and death: Death and permanent incapacity can also allow you access; provided that you have complete medical proof that you will be unable to work again.
Advantages and Disadvantages of Early Release of Your Super
To determine whether or not you should get an early release f your super, it is worthwhile to consider the advantages and disadvantages of doing so.
Advantages of Early Access of Your Super
- No additional loans: By taking money from your superannuation, you don’t have to borrow or make an extra loan to pay off your debts.
- Peace of mind: By being able to pay your creditors, you will be saved from the constant harassment and threats by paying off any outstanding debts you have. You won’t also be in constant fear of having your car or house repossessed.
- Control of your debts: By being able to pay your debts, you would be relieved of further stress. Moreover, you’ll be more in control over your debts.
Disadvantages of Getting an Early Release of Your Super
- Higher tax: When you access your super before your retirement you won’t be eligible for the lower tax breaks and will have to pay a higher amount in tax.
- Less money for your retirement: As long as you don’t anticipate future debt problems, it should not be a cause of worry. However, any money taken from your super means lower money during your retirement.
- Loss of protection: It should be noted that money in your super fund is protected from creditors. By taking them out of your fund, you are also taking the protection away.
- Exposure to illegal schemes: By taking your money from your super fund, you are inviting trouble from illegal schemes. There have been stories where people have been exploited by charging them excessive rates during financial hardships.
- Extra charges: Requesting the release of your superannuation may incur extra fees and charges.
When looking at things on a short-term basis, getting your super fund early may seem beneficial. However, extra caution should be taken before making that big decision. Be sure to explore other possible areas how you can solve any financial problems before getting your super early.
Enquire with LifeTime Financial Group
LifeTime Financial Group are Accredited as 'Specialist SMSF Accredited Financial Planner' and 'CFP Specialist Financial Planning and Fellow of the FPA'
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