Can I Get Money Out of My Super Early?

Australia’s superannuation system, often simply called “super,” serves as a mandatory savings scheme designed to provide individuals with income during their retirement years. This system requires employers to contribute a portion of an employee’s earnings into a super fund, accumulating over their working life. While the primary goal of super is to ensure financial security in later years, the funds are generally preserved until a person reaches a certain age and condition of retirement. Accessing these savings earlier than planned is an exception, permitted only under specific and limited circumstances.

Understanding General Superannuation Access

Individuals typically gain access to their superannuation funds once they reach their “preservation age” and meet certain retirement conditions. The preservation age varies depending on the individual’s date of birth. For those born before July 1, 1960, the preservation age is 55, gradually increasing to 60 for those born on or after July 1, 1964. Once this age is met, a person can generally access their super if they cease gainful employment with no intention of working again, or upon reaching age 65, even if still employed.

Upon becoming eligible, individuals have flexibility in how they receive their super benefits. They can choose to withdraw their super as a single lump sum payment, convert it into an ongoing income stream, or utilize a combination of both options. A lump sum provides immediate access to the entire balance, which can be useful for paying off debts or making significant purchases. Alternatively, an income stream, often referred to as an account-based pension, provides regular payments, similar to a salary, helping to ensure a steady income throughout retirement.

Circumstances for Early Superannuation Release

Accessing superannuation before reaching preservation age and retirement is permitted only under strictly defined conditions. These exceptional circumstances are designed to provide financial relief in situations of genuine need. Each condition has specific criteria that must be met for eligibility.

Compassionate Grounds

One pathway for early access is through compassionate grounds, which cover a range of serious personal circumstances. This includes needing funds for medical treatment or transport for a life-threatening illness, severe pain, or mental illness for oneself or a dependant. Funds may also be released to cover palliative care expenses for a terminal medical condition, or to pay for modifications to a home or vehicle to accommodate a severe disability. Preventing the foreclosure or forced sale of a home, or covering death, funeral, or burial expenses for a dependant, also qualify under compassionate grounds. To be eligible, the expense must be unpaid, and the applicant must demonstrate an inability to pay for it without accessing their super.

Severe Financial Hardship

Severe financial hardship applies when an individual is unable to meet reasonable and immediate living expenses.

Under preservation age plus 39 weeks: Eligibility requires having received eligible government income support payments for a continuous period of 26 weeks. A maximum of $10,000 (gross, before tax) may be released within a 12-month period, with a minimum withdrawal of $1,000. If the super balance is less than $1,000, the remaining balance after tax can be withdrawn.
At or over preservation age plus 39 weeks: Applicants must have received government income support payments for a cumulative period of 39 weeks since reaching preservation age and not be gainfully employed. No restrictions apply to the withdrawal amount in this scenario.

Terminal Medical Condition

A terminal medical condition allows for early release if two registered medical practitioners, with at least one being a specialist, certify that the individual has an illness or injury likely to result in death within 24 months. The certification period must not have ended.

Temporary Incapacity

Temporary incapacity provisions permit access if a physical or mental medical condition temporarily prevents an individual from working, or requires them to work fewer hours.

Permanent Incapacity

Permanent incapacity, also known as Total and Permanent Disability (TPD), allows for early release if a medical condition makes it unlikely for an individual to ever be gainfully employed again in a job for which they are reasonably qualified.

Small Super Balances

Individuals with very small super balances may also access their funds early. If an individual ceases employment and their super account balance is less than $200, they can typically request withdrawal directly from their super fund.

Process for Requesting Early Release

The application process for early superannuation release requires specific documentation. The first step involves gathering all necessary information and supporting evidence relevant to the specific early release condition. For compassionate grounds, this typically includes medical reports, unpaid invoices or quotes for the expenses, and a statutory declaration confirming the inability to pay without super. Medical certificates from two doctors, including a specialist, are required for a terminal medical condition. For severe financial hardship, proof of government income support payments for the required period and evidence of inability to meet living expenses are essential.

Applications for compassionate grounds are generally made through the Australian Taxation Office (ATO) online services via a myGov account. Applicants must upload digital copies of all required evidence, which can include photos of documents in accepted formats like PDF, GIF, JPEG, and PNG. For other early release conditions, such as severe financial hardship, terminal medical condition, temporary incapacity, permanent incapacity, or small super balances, the application is typically submitted directly to the individual’s super fund.

After submission, the application undergoes an assessment process. The ATO generally processes online applications for compassionate grounds within approximately 14 days, with paper applications taking around 28 days. The ATO or the super fund may request further information if the initial documentation is incomplete or unclear. Once a decision is made, the outcome is communicated to the applicant. If approved by the ATO, the approval letter is then provided to the super fund, which will process the payment, typically within 3 to 5 business days after receiving all correct information and the ATO approval.

Tax Considerations for Superannuation Withdrawals

Withdrawing superannuation, whether at retirement or through early release, has specific tax implications. These depend on the individual’s age and the components of their super balance, which include both tax-free and taxable portions.

Lump Sum Withdrawals

For individuals under 60, withdrawals due to compassionate grounds or severe financial hardship are generally taxed as a normal super lump sum. A tax rate between 17% and 22% is typically applied to the taxable component, withheld directly by the super fund. Higher withholding tax rates may apply if a Tax File Number (TFN) is not provided. Once an individual reaches 60 or older, lump sum withdrawals from a taxed source are generally tax-free.

Super Income Streams

If receiving an income stream and under 60, payments are typically taxed. The amount to be declared in a tax return depends on the taxed and untaxed elements of the payment. However, once an individual reaches age 60, income stream payments are generally tax-free.

Specific Early Release Conditions

Withdrawals made due to a terminal medical condition or permanent incapacity are generally tax-free, regardless of the individual’s age.

Accessing super early can reduce an individual’s overall retirement savings, potentially impacting their future retirement income and eligibility for certain government benefits.