Can You Access Your Super Early? Conditions and Process

Superannuation, often called “super,” is Australia’s retirement savings system, where employers contribute a portion of an employee’s salary into a superannuation fund. This system is designed to provide income in retirement, and generally, these funds are preserved until an individual reaches their preservation age and retires. While the primary purpose of super is for long-term savings, specific, limited circumstances permit early access to these funds. These exceptions are in place to address severe personal hardships or medical conditions that necessitate immediate financial relief.

Conditions for Early Access

Early superannuation access is restricted to specific situations, maintaining its role as a retirement vehicle. One such condition is on compassionate grounds, which covers specific, urgent financial needs. This includes expenses for medical treatment for a life-threatening illness or injury for oneself or a dependant, medical transport, or palliative care. Additionally, super can be accessed for modifications to a home or vehicle to accommodate a severe disability, or to cover funeral and burial expenses for a dependant. Preventing foreclosure or forced sale of a primary residence due to mortgage default is also a qualifying compassionate ground. For all compassionate ground applications, the expenses must be unpaid, and the applicant must demonstrate an inability to pay them through other means, such as savings or loans.

Severe financial hardship is another pathway for early super access. To qualify, an individual must have received eligible government income support payments for a continuous period of at least 26 weeks and be unable to meet reasonable and immediate family living expenses. If these criteria are met, a maximum of $10,000 gross (before tax) may be released once within any 12-month period. If the applicant has reached their preservation age, they may also qualify if they have received income support for 39 cumulative weeks and are not gainfully employed, with no maximum withdrawal limit in this specific scenario.

Individuals diagnosed with a terminal medical condition may also access their super early. This condition requires certification by two registered medical practitioners, with at least one being a specialist in a related field, confirming that the illness or injury is likely to result in death within 24 months of the certification date. The payment is generally tax-free if withdrawn within 24 months of certification.

Temporary incapacity allows for super access if an individual is temporarily unable to work, or must work fewer hours, due to a physical or mental medical condition. This type of release often involves an income stream, typically linked to insurance benefits, to supplement lost income. The payments are intended to continue only for the duration of the incapacity and cannot exceed the pre-disability income.

Permanent incapacity permits access to super if a medical condition is likely to prevent an individual from ever working again in a job for which they are qualified by education, training, or experience. This is sometimes referred to as a ‘disability super benefit’. Similar to terminal medical conditions, a super fund requires medical evidence, often including certification from medical practitioners.

For temporary residents leaving Australia permanently, the Departing Australia Superannuation Payment (DASP) allows access to accumulated super. Eligibility for DASP requires that the individual accumulated super while working in Australia on an eligible temporary resident visa, their visa has expired or been cancelled, they have left Australia, and do not hold any other active Australian visa.

Applying for Early Release

The application process for early superannuation release varies depending on the specific condition under which funds are sought. For compassionate grounds and severe financial hardship, the application is typically made through the Australian Taxation Office (ATO). This involves logging into a myGov account linked to ATO online services and accessing the relevant application form. Applicants must provide specific supporting documentation, such as unpaid invoices or quotes for medical treatment, home modifications, or funeral expenses, along with proof they cannot otherwise afford these costs. For financial hardship, evidence of continuous government income support payments is necessary.

Terminal medical condition applications are made directly to the super fund, not the ATO. This requires providing two medical certificates, with at least one from a specialist, confirming the condition and life expectancy of less than 24 months. For temporary or permanent incapacity, individuals should also contact their super fund directly to understand the specific documentation required, which often includes detailed medical reports.

The Departing Australia Superannuation Payment (DASP) can be applied for online via the ATO’s DASP online application system or through a paper form submitted to the super fund or ATO. Before applying for DASP, it is advisable to gather necessary details such as passport number, visa information, Australian bank details, and superannuation account details. The DASP online system can automatically confirm immigration status, simplifying this step.

After submitting an application, the processing time can vary. For ATO-assessed applications like compassionate grounds, it may take up to 14 days for online submissions and 28 days for paper applications. The ATO will notify the applicant of the decision, and if approved, an approval letter is issued. The applicant then typically contacts their super fund with the ATO approval to arrange the payment.

Taxation of Early Release

Early superannuation release payments are generally subject to taxation, differing from the tax-free status often applied to super benefits received after reaching preservation age. The tax implications depend on various factors, including the recipient’s age, the type of early release, and the components of the superannuation balance.

For early release on compassionate grounds or due to severe financial hardship, the super withdrawn is paid and taxed as a normal super lump sum. If the individual is under 60 years old, the taxable component is generally taxed at a rate between 17% and 22%. For those aged 60 or over, these lump sums are generally tax-free, unless they include an untaxed element. The tax payable is usually deducted directly from the lump sum payment before it is released.

Payments released due to a terminal medical condition are generally tax-free, regardless of the recipient’s age, provided the payment is made within 24 months of the medical certification. For permanent incapacity, if a lump sum is received, the tax-free component may be increased, potentially reducing the overall tax liability. Temporary incapacity payments, typically received as an income stream, are taxed as a super income stream, with tax rates varying based on the benefit components and the recipient’s age.

The Departing Australia Superannuation Payment (DASP) has specific withholding tax rates. The tax-free component of a DASP is subject to a nil withholding tax rate. However, the taxable component (taxed and untaxed elements) is generally subject to a withholding tax rate. For those who held a Working Holiday Maker (WHM) visa, a higher DASP WHM tax rate of 65% applies to the taxed and untaxed elements of the taxable component. For other temporary visas, the standard DASP tax rates apply, which can be around 35% for the taxed element and 45% for the untaxed element.