How to Withdraw Super: Rules for Accessing Your Funds

Superannuation, often referred to as “super,” represents Australia’s compulsory retirement savings system, designed to provide financial support in later life. Funds contributed to superannuation accounts are generally preserved, meaning they are held until specific conditions are met, typically upon reaching retirement age. While the system primarily serves long-term wealth accumulation for retirement, certain circumstances permit earlier access to these accumulated funds. Understanding the rules for withdrawing superannuation is essential for individuals seeking to access their savings.

Superannuation Withdrawal Eligibility

Accessing superannuation funds depends on meeting specific “conditions of release.” The most common pathway involves reaching a “preservation age” and satisfying a retirement definition. For those born on or after July 1, 1964, the preservation age is 60 years. Once an individual reaches age 60 and ceases gainful employment, or if they are 65 or older regardless of employment status, they can generally access their super.

An individual diagnosed with a terminal medical condition may access their superannuation early. Two medical practitioners, with at least one being a specialist, must certify that the illness or injury will likely result in death within 24 months. Withdrawals are typically tax-free lump sums.

Temporary incapacity provides another avenue for early access if physical or mental ill-health temporarily prevents an individual from working or requires them to work fewer hours. Benefits accessed under this condition usually originate from insured benefits or voluntary employer-funded contributions within the super fund and are paid as an income stream, not a lump sum. The super fund requires supporting medical evidence.

Permanent incapacity (TPD) allows access to superannuation as a lump sum. Two medical practitioners must certify that a physical or mental health issue is likely to prevent the individual from ever again engaging in gainful employment. This condition permits access to any TPD insurance benefits held within the super fund, along with other accumulated super benefits. The super fund trustee must be satisfied of the permanent incapacity.

Severe financial hardship provides a limited avenue for early super access. An individual must have received eligible government income support payments continuously for 26 weeks and be unable to meet reasonable and immediate family living expenses. The withdrawal amount is typically $1,000 to $10,000, and only one withdrawal is generally permitted in any 12-month period. For those past their preservation age, 39 weeks of income support is required after reaching preservation age, and they must not be employed full-time or part-time.

Superannuation can also be accessed on compassionate grounds, with ATO approval. This covers specific circumstances such as paying for medical treatment or transport for oneself or a dependant, preventing home loan foreclosure, or covering funeral expenses for a dependant. The applicant must demonstrate no other means to pay for these expenses.

Upon the death of a superannuation member, their accumulated benefits are paid to nominated beneficiaries or their legal personal representative. The tax treatment depends on the beneficiary’s relationship and whether the payment is a lump sum or income stream.

Temporary residents departing Australia (DASP) can claim their superannuation after their temporary visa has ceased and they have left the country. This payment is for individuals who accumulated super while working in Australia on a temporary visa and are not Australian or New Zealand citizens or permanent residents. Applications are made through the ATO’s online system, and a tax is generally withheld.

Finally, very small and inactive super balances can be accessed. If employment is terminated and the super account balance is less than $200, the funds may be withdrawn to prevent fees from eroding small balances.

Types of Superannuation Withdrawals

Once a condition of release is met, superannuation funds can be accessed in different forms. A lump sum withdrawal involves taking a single payment of all or a portion of the superannuation balance. Lump sums are common for full retirement, permanent incapacity benefits, or a member’s death.

Alternatively, superannuation can be converted into an income stream, often called a pension. This provides regular payments from the super fund, offering a steady income during retirement. An income stream aims to provide ongoing financial support, similar to a salary.

Some individuals combine both a lump sum withdrawal and an income stream. A portion of the super balance might be taken as a lump sum for immediate expenses, with the remainder used for an income stream for ongoing living costs. This flexibility allows individuals to tailor their superannuation access to their financial needs.

Tax Implications of Superannuation Withdrawals

The tax treatment of superannuation withdrawals varies by age and super balance components. A superannuation balance consists of two parts: a tax-free component and a taxable component. The tax-free component includes non-concessional contributions (after-tax contributions) and is not taxed upon withdrawal at any age. The taxable component comprises concessional contributions (before-tax contributions) and investment earnings, and its taxation depends on the member’s age.

For individuals aged 60 or over, both lump sum withdrawals and income stream payments from a taxed super fund are generally tax-free. This applies regardless of employment status, provided they have reached age 60.

If a member is under 60, the taxable component of a lump sum payment may be subject to tax. For those between preservation age and 59, a “low rate cap” applies, allowing a portion of the taxable component to be tax-free. Any amount above this cap is taxed at 15% (plus the Medicare levy). From July 1, 2024, as the preservation age aligns with age 60, the low rate cap will become less relevant. For those under preservation age, lump sum withdrawals of the taxable component are generally taxed at 20% (plus the Medicare levy).

Income streams received by those under 60 are typically taxed, though a 15% tax offset may apply to the taxable portion. The Medicare levy is generally applied in addition to base tax rates on taxable components.

Superannuation benefits accessed due to a terminal medical condition are entirely tax-free, regardless of age. For permanent incapacity, tax treatment of lump sum payments can depend on a tax-free uplift, resulting in concessional tax treatment. Withdrawals due to severe financial hardship or on compassionate grounds are generally paid and taxed as a normal super lump sum. If the member is under 60, these withdrawals are typically taxed at between 17% and 22%, including the Medicare levy. For DASP, a tax of 35% is generally applied to the taxed element, with higher rates potentially applying to those on working holiday visas.

Steps to Access Your Superannuation

Initiating a superannuation withdrawal begins with contacting your specific superannuation fund. Each fund has its own processes and forms, so this initial contact is crucial. They are the primary point of contact throughout the process.

Your super fund will provide the necessary application forms and detail the required documentation. This includes proof of identity and evidence that you meet a valid condition of release, such as medical certificates or statutory declarations. For compassionate grounds, documentation like unpaid invoices or quotes for expenses is needed.

Accurately complete the application forms provided by your super fund. Double-check all details to prevent delays, ensuring consistency with the evidence you are submitting. The forms require precise information about the type of withdrawal requested and your personal circumstances.

Completed application forms and supporting documentation can be submitted through various methods, including online portals, mail, or in-person. Retain copies of all submitted documents for your records.

Superannuation funds have processing timeframes for withdrawal requests, ranging from a few days to several weeks. If there are any delays or questions, follow up directly with your super fund’s member services department.