What is super?

Superannuation also known as ‘super’ is money set aside while you’re working to support your financial needs in retirement. Your super is invested in a range of assets to help grow your balance so you can have the best possible retirement outcome and as such, super is typically only withdrawn upon retirement. If you aren't 65 years or older, there are certain exceptions to the rule regarding withdrawal eligibility. lump sum withdrawals retirement income stream

Can I use my super to pay off debt?

In certain situations, such as financial hardship or medical reasons, you may be able to access your super early, either through lump sum withdrawals or by withdrawing through your retirement income account. However, this will depend on your specific circumstances and the policies of your super provider.

Additionally, if you were a temporary resident working in Australia and have since left the country, you may also be eligible for early access to your super.

It's important to note that accessing your super early can have significant consequences for your retirement, so it should be considered as a last resort.

Before making a decision, it's recommended that you seek the advice of a professional financial planner or lawyer.

Additionally, be aware that there are many scammers targeting Australians with illegal schemes for early access to super, so be sure to verify the credentials and intentions of anyone offering advice in this area.

First Home Super Saver Scheme

The First Home Super Saver Scheme allows you to use your voluntary contributions (both pre-tax and post-tax) to your super account made since 1 July 2017 towards saving for your first home.

To be eligible, you must meet certain criteria.

You can apply to release a maximum of $15,000 of your voluntary contributions from any one financial year, with a total limit of $50,000 across all years.

Additionally, you will also receive an amount of earnings that are associated with those contributions.

Grounds for accessing super early

There are eligibility rules you need to meet to access your super early as you normally can't get your super until you reach your preservation age and retire.

Why does preservation age change depending on the year you were born?

The preservation age, which determines when an individual can access their super, is set by the government. Taking into account the trend of longer retirements, the preservation age is being incrementally raised from 55 to 60, with the goal of encouraging individuals to save more for their retirement through growing larger super balances. This will have an impact as generally speaking, unless you are experiencing one of the special circumstances outlined below you will not be able to access your super until you reach preservation age.

Access due to severe financial hardship

The Australian Taxation Office (ATO) does not handle applications for severe financial hardship withdrawals from your super. To request access to your super due to severe financial hardship, you need to contact your super provider.

To be eligible for a withdrawal, you must have received eligible government income support payments for 26 consecutive weeks and be unable to meet immediate and reasonable living expenses for yourself and your family.

The minimum amount that can be withdrawn is $1,000 and the maximum is $10,000, and you can only make one withdrawal in a 12-month period. If you have reached your preservation age plus 39 weeks and were not gainfully employed when you applied, there are no cashing restrictions.

Your super provider may ask for evidence, in that case, you should contact Services Australia to request a letter confirming your eligibility. Withdrawals made due to severe financial hardship are taxed as a normal super lump sum, with no special tax rates.

If you are under 60 years old, the withdrawal is generally taxed between 17% and 22%. If you are 60 or older, super withdrawals are usually tax free.

Access due to temporary incapacity

You may be able to access your super if you are temporarily unable to work or need to work fewer hours due to a physical or mental medical condition. This type of withdrawal is typically used to access insurance benefits linked to your super account and the super will be received in regular payments over the period of time that you are unable to work.

Withdrawals made due to temporary incapacity are taxed as a super income stream. Contact your super provider to request access to your super due to temporary incapacity and to inquire about insurance benefits attached to your account. There are no special tax rates for a super withdrawal made due to temporary incapacity.

If you do not have access to insurance benefits as part of your super account, consider if you are eligible for access due to severe financial hardship.

Access due to permanent incapacity

You may be able to access your super if you are permanently incapacitated. This type of withdrawal, also known as a "disability super benefit," requires that your super fund be satisfied that you have a permanent physical or mental medical condition that is likely to prevent you from ever working again in a job you were qualified for by education, training or experience. However, you may still be eligible for withdrawal even if you are working in a different position or field.

The super can be received as a lump sum or as regular payments. Withdrawals made due to permanent incapacity are subject to different tax components, and to receive favourable tax treatment, your permanent incapacity must be certified by at least two medical practitioners. Contact your provider to request access to your super due to permanent incapacity. The tax on your withdrawal will depend on the proportion of tax-free component, taxed element, and untaxed element in your super account.

If you are under your preservation age and receive a disability benefit as an income stream, you will receive tax offsets that reduce the tax rate on the taxed element of your taxable component by 15%. If you have reached your preservation age or receive a lump sum, your disability benefit will be taxed at the rates described in How tax applies to your super.

Access on compassionate grounds

In certain circumstances, you may be able to withdraw some of your super on compassionate grounds. These grounds include the need for funds to cover expenses such as medical treatment and transportation for yourself or a dependant, palliative care, payments on a home loan or council rates to prevent the loss of your home, accommodating for a disability for yourself or a dependant, and expenses related to the death, funeral or burial of a dependant.

Be aware of scams and schemes

Be aware of potential scams or fraudulent schemes where individuals may falsely claim to be affiliated with the Australian Taxation Office (ATO) or a reputable organisation such as your super fund, with the goal of stealing your money or personal information.

Additionally, be wary of individuals who contact you offering services, such as early access to your superannuation, for a fee, as these services may be available for free.

If you receive any unsolicited communication, such as a phone call, text message or email, offering assistance in releasing your super early, do not provide any personal information or click on any links.

Next Steps

Things to consider before accessing super early

When considering early withdrawal of your super, it's essential to take into account the potential consequences on your retirement income, tax liability, insurance coverage through your super, and any government benefits you may be receiving. It's important to weigh all these factors before making a decision, even if you meet the strict eligibility requirements.

Illegal early release of super

Be cautious of individuals or organisations that advertise the ability to provide early access to your super through transferring it into a self managed super fund. These schemes are illegal, and severe penalties may be imposed if you participate in them.

Thinking about setting up a Self Managed Super Fund?

Deciding whether a Self Managed Super Fund (SMSF) is right for you can be difficult. It's best to seek a qualified licensed financial advisor to help you as our advisory services are limited to taxation advice.

We have looked after hundreds of SMSF clients over the last two decades and have many years of experience delivering quality SMSF accounting services and professional advice. We can act as your end to end for the whole process of SMSF setup, making use of our strategic relationships with several financial advisory firms and a nationally recognised auditing firm.

If you have questions about whether or not you can withdraw your super, how to access super when the fund is in pension phase or concerns about whether your super will be able to cover your future living expenses in your retirement or are just after general advice regarding super, we and our network of financial wealth management professionals are here to help.