How and When Can You Access Your Superannuation?

Superannuation, often referred to as “super,” represents Australia’s retirement savings system, designed to provide individuals with financial security in their later years. While the primary purpose of superannuation is to accumulate funds for retirement, specific and limited circumstances permit earlier access to these savings. Understanding these conditions is important for anyone seeking to manage their retirement funds effectively. This article outlines the standard and exceptional pathways for accessing superannuation benefits.

Accessing Superannuation at Preservation Age and Retirement

Accessing superannuation begins when an individual reaches their “preservation age” and meets a specified condition of release. Preservation age varies from 55 to 60, depending on one’s date of birth. Once this age is met, individuals gain partial access to their super.

Full unrestricted access to superannuation becomes available upon reaching age 65, regardless of employment status. Alternatively, if an individual reaches their preservation age and formally retires from an employment arrangement, they can access their accumulated super. Funds can be accessed either as a lump sum payment or converted into an income stream, such as an account-based pension. For those who have reached preservation age but are not yet fully retired, a transition to retirement (TTR) income stream allows partial access while continuing to work, providing regular payments from super savings.

Grounds for Early Release of Superannuation

Early access to superannuation before reaching preservation age is limited to severe circumstances. Each ground has precise eligibility criteria and requires specific supporting documentation.

Severe Financial Hardship

Access due to severe financial hardship is possible if an individual has received Commonwealth income support payments for a continuous period of 26 weeks and is unable to meet reasonable and immediate family living expenses. Evidence includes Centrelink statements confirming income support and proof of overdue bills for essential needs like utilities, rent, or medical costs. If under preservation age, the maximum withdrawal amount is between $1,000 and $10,000 before tax within a 12-month period, with only one such withdrawal permitted.

Compassionate Grounds

Superannuation can be released on compassionate grounds for unpaid expenses that cannot otherwise be met. Eligible purposes include paying for medical treatment or transport for oneself or a dependant, preventing foreclosure or forced sale of a home, modifying a home or vehicle for severe disability, palliative care, or funeral and burial expenses for a dependant. Required evidence includes unpaid invoices, quotes for services, or default notices for a mortgage.

Terminal Illness

If diagnosed with a terminal illness, an individual may access their super if two registered medical practitioners certify that the illness or injury is likely to result in death within 24 months. At least one of these practitioners must be a specialist in a relevant area. The required evidence is medical certificates from both doctors, confirming the diagnosis and life expectancy.

Temporary Incapacity

Temporary incapacity allows for super access if a physical or mental medical condition temporarily prevents an individual from working or requires them to work fewer hours. This condition facilitates access to insurance benefits linked to the super account, paid as regular income streams. Medical certification from a doctor outlining the nature of the incapacity and its impact on working capacity is required.

Permanent Incapacity

Permanent incapacity applies when a physical or mental condition makes it unlikely that an individual will ever be gainfully employed in an occupation for which they are reasonably qualified by education, training, or experience. Similar to temporary incapacity, this release involves accessing insurance benefits within the fund. Strong medical evidence, including reports from two doctors, is necessary to support the claim of permanent inability to work.

The Early Release Application Process

Applying for early release of superannuation requires specific procedures, which vary depending on the grounds for the request. The Australian Taxation Office (ATO) and individual superannuation funds each play a role in this process.

For compassionate grounds and terminal illness, applications are made directly to the Australian Taxation Office. Applicants use the ATO’s online services via their MyGov account, navigating to the “Super” section to find the relevant application form. Digital copies of all required supporting documents, such as medical reports, invoices, or default notices, must be uploaded with the application. After submission, the ATO assesses the application and, if approved, sends an approval letter to the applicant. This letter must then be provided to the super fund to arrange the release of funds.

For severe financial hardship, temporary incapacity, and permanent incapacity, the application process is handled directly by the individual’s superannuation fund. Applicants will need to submit evidence such as Centrelink statements for financial hardship or medical certificates for incapacity, along with their fund’s application forms. Funds assess these applications against legislative requirements and communicate decisions directly to the applicant. Processing times can vary, ranging from a few days to several weeks, and additional information may be requested during assessment.

Taxation on Superannuation Withdrawals

The tax implications of withdrawing superannuation benefits depend on various factors, including the individual’s age, the components of their super balance, and the reason for withdrawal. Superannuation balances are divided into a tax-free component and a taxable component, which may include taxed and untaxed elements. The tax-free component consists of non-concessional contributions and is not subject to tax upon withdrawal.

For individuals under 60, the taxable component of a superannuation lump sum withdrawal is taxed at up to 22%. If the withdrawal is taken as an income stream, the taxable portion is added to the individual’s assessable income and taxed at their marginal tax rate, though a 15% tax offset may apply. Upon reaching age 60, superannuation lump sum withdrawals and income stream payments become tax-free. This tax-free status applies to both the tax-free and taxable components for those aged 60 and over.

Withdrawals made under early release conditions, such as severe financial hardship or compassionate grounds, are taxed as normal superannuation lump sums based on the individual’s age and the components of the payment. However, payments released due to a terminal medical condition are tax-free, provided the withdrawal occurs within 24 months of the medical certification. Accessing super early can reduce the long-term growth of retirement savings and may impact eligibility for government benefits.