How Can I Withdraw My Superannuation?

Superannuation, often called “super,” is Australia’s retirement savings scheme. It involves money contributed by employers and sometimes employees into an investment fund, which grows over time to provide income during retirement. This article guides individuals through the conditions and steps for accessing these accumulated funds.

Eligibility for Superannuation Withdrawal

Accessing superannuation funds is subject to specific conditions designed to ensure these savings are primarily used for retirement. A primary pathway is reaching your “preservation age,” which varies from 55 to 60 years depending on your birth date. Upon reaching this age, you can access your super if you meet the definition of “retirement” by ceasing gainful employment with no intention of returning to work, or by simply ceasing an employment arrangement on or after age 60. For those aged 65 or older, superannuation can be accessed regardless of employment status.

In circumstances involving severe health conditions, superannuation can be accessed early. A “terminal medical condition” allows for withdrawal if two medical practitioners, with at least one being a specialist, certify that an illness or injury is likely to result in death within 24 months of the certificate’s date. Withdrawals made under this condition are tax-free if claimed within the 24-month period. Individuals facing “temporary or permanent incapacity” that prevents them from working or significantly reduces their working hours are also eligible to access their super.

Financial distress can also provide grounds for early access to superannuation. “Severe financial hardship” provisions allow for withdrawals under strict criteria. If you are under your preservation age plus 39 weeks, you must have been receiving eligible Commonwealth income support payments continuously for at least 26 weeks and be unable to meet reasonable and immediate family living expenses. For individuals in this situation, a single payment between $1,000 and $10,000 (less tax) can be made within a 12-month period. If you have reached your preservation age plus 39 weeks, you can access any amount if you have received Commonwealth income support for a cumulative 39 weeks since your preservation age and are unemployed or working less than 10 hours per week. Proof of financial difficulties, often through Centrelink statements, is necessary to demonstrate eligibility.

Withdrawals on “compassionate grounds” are another avenue for early access, managed by the Australian Taxation Office (ATO). These grounds include paying for essential medical treatment or transport for yourself or a dependant, modifying a home or vehicle for severe disability, preventing the foreclosure or forced sale of your home, covering palliative care expenses, or funding funeral costs for a dependant. To qualify, you must demonstrate that you have unpaid expenses and no other financial means to cover these costs.

For individuals with very small super balances, specific rules allow for withdrawal. If your employment is terminated and your superannuation account balance is less than $200, you can access these funds. Temporary residents who have earned superannuation while working in Australia are eligible for a “Departing Australia Superannuation Payment” (DASP) once they permanently leave the country. To claim DASP, your temporary visa must have ceased to be in effect, you must have left Australia, and you cannot hold any other active Australian visa, nor be an Australian or New Zealand citizen or permanent resident.

To prepare for any superannuation withdrawal, gathering specific documentation is important. This involves obtaining medical certificates for health-related claims, Centrelink statements for financial hardship, and invoices or quotes for compassionate grounds. Having these documents ready helps demonstrate that you meet the necessary conditions.

Steps to Withdraw Superannuation

Once eligibility and necessary supporting documentation are assembled, initiate the withdrawal process by contacting your superannuation fund. Your super fund is the primary administrator of your account and will provide specific application forms and detailed instructions tailored to your situation.

Upon contacting your fund, you will be directed to their website or provided with a physical application form. This form requires personal details, such as your full name and contact information, along with your bank account details. You will also need to specify the eligibility condition and declare that you meet the stated criteria.

Supporting documentation is an important part of the application. In addition to eligibility documents, you will need to provide general proof of identity, such as a driver’s license or passport, and bank statements for payment verification. For a Departing Australia Superannuation Payment (DASP) where the balance is $5,000 or more, certified copies of identification documents are often required. It is advisable to have these documents certified while still in Australia, if possible.

Applications can be submitted through various methods, including online portals, by mail, or in person at a fund branch. For applications based on compassionate grounds, the application is submitted directly through the Australian Taxation Office (ATO) via their online services. It is important to ensure all fields on the application form are accurately completed and all required documents are attached before submission.

After submission, processing times can vary. Applications for compassionate grounds submitted to the ATO take around 14 days for online submissions and up to 28 days for paper applications. Departing Australia Superannuation Payments are processed within 28 days of the super fund receiving the complete application from the ATO. Your super fund will communicate the outcome of your application, confirming withdrawal or requesting further information if details are incomplete or unclear.

Taxation of Superannuation Withdrawals

Understanding the tax implications of superannuation withdrawals is important, as tax payable varies significantly based on age and the type of component being withdrawn. Superannuation balances are composed of two parts: a tax-free component and a taxable component. The tax-free component consists of after-tax contributions and government co-contributions. The taxable component includes employer contributions, salary sacrifice contributions, personal contributions for which a tax deduction was claimed, and investment earnings within the fund. Most super funds are “taxed funds,” meaning they have already paid tax on contributions and earnings.

For individuals aged 60 or over, withdrawals from a taxed super fund are tax-free. This applies to both lump sum withdrawals and income streams. This tax-free status simplifies retirement planning for many individuals reaching this age bracket.

Withdrawals by individuals under 60 are subject to specific tax rules on the taxable component. If a lump sum is withdrawn by someone under their preservation age, a tax rate of 20% plus the Medicare levy applies. For those between their preservation age and 60, a “low rate cap amount” allows a portion of the taxable component to be withdrawn tax-free. Amounts exceeding this threshold are taxed at 15% plus the Medicare levy. From 1 July 2024, this low rate threshold will no longer be relevant for withdrawals by individuals aged 60 or over who have reached their preservation age, as these payments will be entirely tax-free. Withdrawals due to severe financial hardship, if under 60, are taxed at up to 22% (including the Medicare levy) on the taxable portion.

The Departing Australia Superannuation Payment (DASP) is subject to higher tax rates, reflecting its nature as an early access payment for non-residents. If an individual has never held a Working Holiday Maker (WHM) visa, ordinary DASP tax rates apply to the taxable component. However, if the payment includes superannuation contributions made while holding a WHM visa, a higher DASP WHM tax rate of 65% on the taxable component will apply to the entire payment. The tax-free component of a DASP is not taxed.

Providing your Tax File Number (TFN) to your super fund is important, as failing to do so can result in significantly higher tax being withheld from any withdrawals. Given the complexities of superannuation taxation, it is advisable to seek personalized financial or tax advice for your specific circumstances.