Are you considering or seeking an early release of super? Unsure about what is required or whether it is permitted? There are a number of factors that contribute to whether or not an individual can secure an early release of super.
These include some special circumstances where the usual rules do not apply.
In this article we will discuss:
- When you can access your super.
- Reasons you may secure an early release of super.
- Do all funds allow the early release of super?
- Possible downsides to accessing your super early.
- Where to seek help.
When Can You Access Your Super?
Usually, you cannot access your super until you meet your preservation age. Preservation age varies depending on the year you were born, but is between 55 and 60 years of age. You can learn more about preservation ages and which one applies to you here.
Reasons You May Secure an Early Release of Super
In Australia, superannuation is a protected asset designed only to be used for retirement.
There are, however, circumstances under which you are permitted to gain early access to superannuation ahead of your preservation age. These include:
Should you be unable to work or need to drastically reduce your working hours due to significant illness or injury, you can request to access your super early. Access can be granted for both short-term and long-term incapacity with varying degrees of access allowed.
Severe Financial Hardship
If for a period of 26 weeks or more you have been unable to meet your financial commitments and have been receiving government financial assistance, you may be approved to access your super early.
In this circumstance, the minimum you can withdraw is $1000 and the maximum is $10,000 – with only one withdrawal permitted in a 12-month period.
If you are diagnosed with a terminal disease and the prognosis is that death will occur within 24 months of diagnosis then you may be eligible. The claim must be supported by two separate medical professionals.
For lost or inactive accounts with balances under $200, you may be permitted to access the funds rather than rolling it to a new account. It is important to note that for all these circumstances, proof of eligibility will be required and there is a formal process in place.
The ATO closely monitors the early release of super. Providing false information with the intent of accessing superannuation early comes with severe penalties.
Compassionate Grounds covers things such as funding a funeral, medical expenses, home modifications in the case of a disabling injury and home loan repayments if foreclosure is threatened.
Compassionate Grounds has also, at times, been offered during periods such as the COVID-19 pandemic when many people lost their employment.
Do All Super Funds Allow Early Release of Super?
In short, no. Even if you have genuine and compelling circumstances, not all funds will allow you to secure an early release of superannuation. Should you meet one of the criteria outlined above and your fund does not permit you to make a withdrawal, you are permitted to shift your balance to a fund that does.
Possible Downsides of Early Access to Super
Pursuing an early super withdrawal should only be done after careful consideration of all other alternatives. Withdrawing super funds early can significantly impact the amount you receive upon retirement. This is due to losing the benefit of compound interest over a number of years.
Depending on when you withdraw the funds, this could mean missing out on double that figure by the time you reach preservation age. Should you have a self-managed super fund (SMSF), withdrawing super early can impact other fund members, meaning that their compound interest and final retirement sum is also impacted.
All lump sums withdrawn early will be taxable at between 17 and 22 per cent.
Know More About Early Release of Super with Collins Mann
Should you need to access emergency funds and are considering accessing your super, it is wise to seek professional advice before doing so. This is particularly true if you are the trustee of an SMSF.
At Collins Mann, our fully licensed and qualified financial advisors can help you review your options and determine the best way forward. Should releasing super early be the best choice, we can also walk you through the process and support you to achieve this.
Contact Collins Mann today on 07 3251 3200 for advice on early release of super.