How and When Can You Withdraw From Your Superannuation?

Superannuation, often referred to as “super,” is Australia’s compulsory retirement savings system designed to provide financial support for individuals in their retirement years. Employers make regular contributions into a superannuation fund on behalf of their employees, with the goal of accumulating funds that will generate income once working life concludes. While this system aims to secure future financial well-being, access to these accumulated savings is restricted, with specific conditions dictating when and how funds can be withdrawn.

Superannuation Access Conditions

Accessing superannuation benefits occurs upon reaching a certain age and meeting specific conditions. The primary pathway is reaching your “preservation age,” which varies based on your birth date. For individuals born before July 1, 1960, the preservation age is 55, gradually increasing to 60 for those born after June 30, 1964. Once preservation age is met, full access to superannuation is permitted when an individual retires from gainful employment.

Another avenue for access is reaching age 65, which grants unrestricted access to funds, regardless of employment. Individuals who reach age 60 and cease employment can access all superannuation accrued. Any new superannuation contributions from subsequent employment are then preserved until another condition of release is met.

Individuals who have reached their preservation age but are not yet fully retired may consider a Transition to Retirement Income Stream (TRIS). A TRIS allows partial access to superannuation while still working, providing a regular income stream to supplement reduced working hours or to implement tax-effective strategies. There are limitations, however, as a TRIS restricts annual withdrawals to a maximum of 10% of the account balance. These income streams are non-commutable, meaning they must be taken as regular payments rather than a single lump sum, until the individual turns 65 or meets another condition of release, then converts to a retirement phase pension.

Beyond retirement, circumstances allow early release of superannuation on compassionate grounds, managed by the Australian Taxation Office (ATO). These grounds include paying for medical treatment or transport for the individual or a dependent due to life-threatening illness or chronic pain. Funds may also be released for palliative care, funeral expenses for a dependent, or to prevent foreclosure or forced sale of a primary residence. Significant disability may also qualify for early release to cover costs for home or vehicle modifications, or disability aids.

To be eligible, the expense must typically be unpaid, and the individual must demonstrate an inability to afford the cost without accessing their super. Applicants must be an Australian or New Zealand citizen or a permanent resident.

Severe financial hardship presents another pathway for early superannuation access. To qualify, an individual must have received eligible Commonwealth income support payments for a continuous period of 26 weeks and be unable to meet reasonable and immediate family living expenses. For those under preservation age, the maximum release amount is between $1,000 and $10,000 within a 12-month period. If an individual has reached their preservation age and has received eligible Commonwealth income support for a total of 39 weeks since reaching that age, and is not gainfully employed, there is no maximum withdrawal limit. A Q230 letter from Centrelink or the Department of Veterans’ Affairs is required to confirm eligibility.

Individuals facing a terminal medical condition can access their superannuation early. This requires certification from two medical practitioners stating that the illness or injury is likely to result in death within 24 months. Applications for this condition are made directly through the superannuation fund.

Temporary residents who have worked in Australia and accumulated superannuation may be eligible for a Departing Australia Superannuation Payment (DASP) after leaving the country. Eligibility for a DASP requires the individual to have held a temporary visa, the visa to have ceased, and for them to have left Australia without holding another active Australian visa. In limited situations, small lost or unclaimed superannuation balances under $200 may be accessed if employment has ceased or the account is deemed lost.

Applying for Release

Initiating a superannuation release requires preparation of information and supporting documentation specific to the withdrawal type. Individuals should gather personal identification details, such as passport and visa information for DASP applications. Details of the superannuation fund, including its Australian Business Number (ABN) and the individual’s account number, are necessary, alongside bank account information for receiving the payment. Providing an Australian Tax File Number (TFN) is advisable to avoid higher tax rates on withdrawals.

For applications based on specific grounds like compassionate release or severe financial hardship, additional evidence is required. This may include medical reports, invoices or quotes for unpaid expenses, or proof of income, debts, and living expenses to demonstrate financial hardship. A Q230 letter from Centrelink or the Department of Veterans’ Affairs is needed for financial hardship claims. Forms can be obtained from the Australian Taxation Office (ATO) website for early release applications, or directly from the superannuation fund for standard retirement withdrawals or Transition to Retirement Income Streams. Accurately complete all informational fields on these forms and prepare any certified copies of documents.

Once all required information and documentation have been prepared, the application process involves submitting the completed forms. For early release on compassionate grounds, severe financial hardship, or DASP, applications are submitted online via the ATO’s MyGov portal. For standard retirement withdrawals, Transition to Retirement Income Streams, or terminal medical condition releases, applications are submitted directly to the superannuation fund, often through their online portals or via mail. After submission, applicants receive a confirmation of receipt, and processing times can vary; for example, DASP applications aim for a 20-day processing period, while some financial hardship applications are processed within 3-5 business days. Superannuation funds or the ATO may request further information if the initial submission is incomplete or unclear.

Taxation of Superannuation Withdrawals

The tax implications of superannuation withdrawals depend on several factors, including the individual’s age at withdrawal and the composition of their superannuation balance. A superannuation balance consists of two components: a tax-free component and a taxable component. The tax-free component includes after-tax contributions and government co-contributions, which have already been taxed or are exempt from tax. The taxable component comprises employer contributions, salary-sacrificed contributions, and investment earnings, which have received concessional tax treatment within the fund. When a withdrawal is made, the payment reflects the proportionate mix of these components within the account; individuals cannot choose to withdraw solely from the tax-free portion.

For individuals under 60 years old, the taxation of superannuation withdrawals varies. If a lump sum is withdrawn under limited early access circumstances (e.g., severe financial hardship or compassionate grounds), the taxable component is taxed at a rate of 20% plus the Medicare levy if under preservation age. For those between preservation age and 60, the taxable component of a lump sum is taxed at 15% plus the Medicare levy, but only on amounts exceeding the low-rate cap. Amounts below this cap are tax-free.

If receiving an income stream, such as a Transition to Retirement Income Stream while under 60, the taxable component is added to the individual’s assessable income and taxed at their marginal tax rate, with a 15% tax offset applied. The tax-free component of an income stream remains untaxed.

For those aged 60 to 64, withdrawals from a taxed superannuation fund are tax-free, whether taken as a lump sum or as an income stream, provided certain conditions are met, such as retirement. Once an individual reaches 65 years old, all superannuation withdrawals, regardless of whether they are lump sums or income streams, are tax-free.

Specific early release payments, such as those due to severe financial hardship or compassionate grounds, are taxed as lump sums. If the individual is under 60, the taxable portion of these payments can be taxed at up to 22%, including the Medicare levy. If the individual is 60 or older, these early release payments are tax-free. Superannuation accessed due to a terminal medical condition is entirely tax-free, regardless of age. For temporary residents receiving a Departing Australia Superannuation Payment (DASP), the payment is taxed before it is issued. It is advisable to provide a Tax File Number (TFN) to the superannuation fund, as failing to do so can result in higher tax rates being applied to contributions and withdrawals.