When and How Can You Access Your Super?

Superannuation, often referred to as “super,” is a long-term savings arrangement designed to provide financial support during retirement. It functions as a compulsory savings scheme where contributions are made throughout an individual’s working life. This article explains the primary and exceptional pathways for accessing super funds, along with the application procedures and tax implications.

Accessing Super at Preservation Age

The most common method for accessing superannuation involves reaching your “preservation age” and meeting certain retirement conditions. Your preservation age is determined by your date of birth, ranging from 55 to 60 years, with the age gradually increasing for those born after July 1, 1960. As of July 1, 2024, anyone who has reached their preservation age is at least 60 years old.

Once you reach your preservation age, you generally need to meet a condition of release, such as retiring from gainful employment. If you are aged 60 or over, ceasing employment allows full access to your super benefits. For those who have reached their preservation age but are under 60, “retirement” means permanently ceasing work with no intention of becoming gainfully employed again.

Super funds can be accessed either as a lump sum or through an income stream, often called an account-based pension. A lump sum provides immediate access to your entire super balance, which can be used for various purposes. However, spending a large sum upfront could deplete your retirement savings faster.

Alternatively, an income stream converts your super into regular payments, similar to a salary, providing a steady income throughout retirement while the remaining balance stays invested. This option offers flexibility in choosing payment frequencies and amounts, subject to minimum withdrawal limits. Individuals who have reached their preservation age but are not yet retired may also access a portion of their super through a Transition to Retirement (TTR) income stream. A TTR pension allows you to receive an income of between 4% and 10% of your account balance each financial year, but you cannot withdraw it as a lump sum.

Specific Conditions for Early Release

Accessing superannuation before reaching your preservation age is permitted only under limited circumstances. These provisions are strict and require meeting precise eligibility criteria, providing a safety net for individuals facing severe hardship or incapacity.

Terminal Medical Condition

This condition applies when two registered medical practitioners certify that an illness or injury is likely to result in death within 24 months. Payments are generally tax-free lump sums with no legal restrictions on the amount.

Incapacity

Temporary incapacity allows access to super if a medical condition temporarily prevents an individual from working or requires reduced hours. Payments are typically made as a regular income stream and are not allowed to exceed the previous earning capacity. Permanent incapacity applies when two medical practitioners certify that ill-health makes it unlikely for an individual to ever work again in a job they are qualified for. Permanently incapacitated individuals can access any total and permanent disability (TPD) insurance benefits held within their super fund, in addition to their accumulated super benefits.

Severe Financial Hardship

This pathway requires continuous receipt of eligible government income support payments for at least 26 weeks, combined with an inability to meet reasonable and immediate family living expenses. For those under preservation age, the minimum withdrawal is $1,000 and the maximum is $10,000 gross within a 12-month period. If an individual has reached their preservation age and is not gainfully employed, they can access their super due to severe financial hardship, with no maximum withdrawal amount.

Compassionate Grounds

Early release may be allowed to cover specific expenses, including:
Medical treatment or transport for oneself or a dependant
Palliative care
Modifications for severe disability
Funeral expenses for a dependant
Assistance to prevent foreclosure or forced sale of a home

Each category requires specific supporting documentation, such as medical reports, invoices, or quotes.

Small Balances and First Home Super Saver Scheme

Individuals may access funds if their employment is terminated and the account balance is less than $200. This also applies to ‘lost super’ accounts under the same threshold, with no tax typically payable. The First Home Super Saver Scheme (FHSSS) enables individuals to make voluntary contributions to their super and then withdraw them, along with associated earnings, to help fund a first home deposit. This scheme has specific contribution and withdrawal limits.

Applying to Access Your Super

Once you determine your eligibility for accessing your super, the application process typically begins by contacting your super fund directly. Your super fund is the primary point of contact and will provide the necessary application forms and guide you through the required documentation.

After obtaining the forms, gather all supporting documents that confirm your eligibility, as outlined in the specific conditions. These documents, which might include medical certificates, government payment summaries, or invoices, must be prepared for submission. Many funds offer online portals for uploading documents.

Following the submission of your application and all required documentation, your super fund will begin a verification process. This involves assessing your eligibility against legislative requirements and their own fund rules. The fund may request additional information or clarification, which can impact processing times.

Processing times generally range from a few days to several weeks, depending on the application’s complexity. Once approved, funds are typically disbursed via direct deposit to your nominated bank account. If uncertain about any part of the process, contacting your super fund or seeking advice from a financial advisor can provide valuable assistance.

Taxation of Super Withdrawals

Understanding the tax implications of super withdrawals is important, as taxation varies based on age, reason for access, and how funds are taken. A super balance generally consists of tax-free and taxable components. The tax-free component typically includes after-tax contributions and government co-contributions. The taxable component generally comprises employer contributions, salary sacrificed amounts, and investment returns.

Lump Sum Withdrawals After Preservation Age

If you are aged 60 or over, the entire lump sum withdrawal from a taxed super fund is generally tax-free. For those between preservation age and 59, a low-rate cap applies, meaning amounts up to this threshold can be withdrawn tax-free. Amounts exceeding this cap are typically taxed at a concessional rate of 15%, plus the Medicare levy, or your marginal tax rate, whichever is lower.

Income Stream Withdrawals After Preservation Age

For individuals aged 60 or over, income stream payments are usually tax-free. For those between preservation age and 59, the tax-free component of the income stream remains tax-free. The taxable component is included in assessable income and taxed at your marginal tax rate, but a 15% tax offset typically applies to the taxable portion.

Early Release Payments

Withdrawals due to a terminal medical condition or permanent incapacity are generally tax-free, regardless of age. Other early release payments, such as those for severe financial hardship or on compassionate grounds, are typically taxed as a lump sum. If you are under 60, these payments are often subject to a tax rate of approximately 17% to 22% on the taxable component, or your marginal tax rate, whichever is lower. These payments usually do not qualify for the tax-free threshold that applies to those over preservation age. Providing your Tax File Number (TFN) to your super fund is important to avoid higher tax rates on withdrawals.