Can I access my super to see me through times of financial hardship?

We receive questions from trustees and professionals about their or their client’s eligibility to access their SMSF contributions early.

On top of the usual ways members can access their super money, it is common for people to start looking at their superannuation balances when under financial stress. However, although it is your personal superannuation account, it is generally difficult to withdraw any benefits from it until retirement. For most of us, our superannuation benefits are ‘preserved’, which basically stops people from accessing their super monies until certain requirements are met.

These requirements are called a ‘condition of release’ and the most common is retirement from the workforce from age 55 (for those born before 1 July 1960). There are circumstances where a member may access their preserved superannuation benefits before retirement and we have discussed the main methods below:

Do you have any unrestricted non-preserved benefits?
The first step would be to check your super fund statement to see if you have any unrestricted non-preserved benefits, as these are able to be withdrawn from your super at any time.

You might have unrestricted non-preserved benefits if you have had a superannuation account for longer than 15 years. For example, personal contributions made to a super fund before 1 July 1999 were not preserved, so it’s possible for members with accounts held before 30 June 1999 to have access to a portion of their superannuation benefit.

Do you meet the rules around severe financial hardship?
Another method of accessing superannuation benefits before retirement is via ‘severe financial hardship’. It would be wise to check with your particular superannuation fund as it’s possible that the fund may not release benefits under financial hardship provisions. There are also specific requirements that must be met in order to withdraw super under this method, and this includes that a person:

Has been receiving Commonwealth income support payments for a continuous period of 26 weeks; and
Is unable to meet reasonable and immediate family-living expenses.

In addition, under the severe financial hardship provisions, if you meet the above requirements the payment must be a single gross lump sum of no more than $10,000 and no less than $1,000 (or a lesser amount if the member’s benefits are less than $1,000). Moreover, only one payment is permitted in any 12-month period.

Is there basis to withdraw superannuation benefits under compassionate grounds?
There is an ability to access preserved superannuation benefits via the ‘compassionate grounds’ condition of release – however, not all superannuation funds may allow withdrawal in this instance.

There are specific and limited options for release of benefits under compassionate grounds. These include that the payment is for medical expenses, to prevent foreclosure of a mortgage on your home, to pay for home or car modifications for severe disability, expenses for palliative care, and funeral expenses.

A superannuation fund member who believes they might be eligible for the release of their preserved benefits under compassionate grounds is able to do so through the Department of Human Services.

Have you suffered termination of gainful employment where your employer contributed to your member account?
There is an ability to access superannuation before retirement under a condition of release called ‘termination of gainful employment’.

This is only available when an employer has contributed to your superannuation fund and the preserved benefits are taken as a lifetime pension that can’t be commuted into a lump sum (unless the preserved benefits are less than $200, in which case the member can cash the benefits without restriction).

Can you withdraw superannuation benefits due to incapacity and illness?
When someone suffers a permanent incapacity and they are unable to engage in employment for which they are qualified, they are generally able to have full access to their preserved benefits before reaching preservation age.

Also, for members suffering temporary incapacity, there is an ability to receive a non-commutable income stream as long as certain conditions are met. In addition, full access to super benefits will be granted when a member has been diagnosed with a terminal illness – again, as long as the trustee can meet specific requirements.

Are you confused by the rules and regulations for taking out your superannuation benefits early? Aquila’s experts are on hand and able to help you understand your rights and options. Contact us today for a whole range of support.

Aquila Super