When Can I Use My Superannuation?

Superannuation, often called “super,” represents Australia’s compulsory savings program designed to provide financial security for individuals in their retirement years. This system mandates employers to contribute a percentage of an employee’s earnings into a superannuation fund. The accumulated funds, along with investment earnings, are generally preserved until specific conditions are met, ensuring a financial foundation for life after employment and reducing reliance on government support.

General Conditions for Accessing Super

Accessing superannuation generally occurs upon reaching a specific age and satisfying certain conditions. The primary condition for most individuals involves reaching their “preservation age,” which varies based on date of birth. For those born on or after July 1, 1964, the preservation age is 60 years.

Upon reaching preservation age, individuals can access their super if they have retired from gainful employment, meaning they have ceased employment with no intention of becoming employed again. Alternatively, once an individual reaches age 65, they can access their superannuation benefits regardless of their employment status. Superannuation can also be accessed in specific circumstances, such as death, terminal illness, or permanent incapacity.

In the event of a member’s death, their superannuation benefits are paid out to eligible beneficiaries, such as financial dependants, or to the deceased member’s legal personal representative. This provides financial support to those left behind.

For individuals diagnosed with a terminal medical condition, super can be released if two medical practitioners, one a specialist, certify the illness is likely to result in death within 24 months.

Permanent incapacity also provides a pathway to access superannuation. This condition is met when two medical practitioners certify that a physical or mental medical condition is likely to prevent an individual from ever being able to work in a job for which they are qualified. Temporary residents departing Australia may also be eligible for a Departing Australia Superannuation Payment (DASP) if they held an eligible temporary visa, their visa has ceased, and they have left Australia without holding another active Australian visa. This is subject to specific tax rules.

Conditions for Early Release of Super

Beyond the general conditions, specific circumstances allow for the early release of superannuation funds. One such situation is severe financial hardship, which permits access if an individual has received eligible Commonwealth government income support payments for a continuous period of at least 26 weeks and is unable to meet reasonable and immediate living expenses. For those under preservation age, the withdrawal is limited to a minimum of $1,000 and a maximum of $10,000, with only one withdrawal permitted within a 12-month period. If an individual is over their preservation age but not yet retired, they may access super due to financial hardship if they have received income support for at least 26 weeks and are not gainfully employed, with no specific withdrawal limit.

Compassionate grounds represent another avenue for early release. These include funding necessary medical treatment or transport for the individual or a dependant. Palliative care expenses for a terminal illness affecting the individual or a dependant can also qualify.

Funds may also be released for disability modifications to a home or vehicle to accommodate a severe disability for the individual or a dependant. Funeral or burial expenses for a dependant are another compassionate ground. Additionally, superannuation can be accessed to prevent the foreclosure or forced sale of an individual’s primary home by a lender. For all compassionate grounds, the individual must demonstrate they cannot meet the expenses through other means.

The First Home Super Saver (FHSS) Scheme allows eligible individuals to save for their first home inside their superannuation fund, leveraging tax concessions. Under this scheme, voluntary super contributions, both before-tax (concessional) and after-tax (non-concessional), can be made. Individuals can contribute up to $15,000 in any one financial year, with a total maximum of $50,000 across all years. The released amount includes eligible contributions and associated earnings, which can significantly boost a first home deposit. To be eligible, the individual must never have owned property in Australia and must intend to live in the purchased home for at least six months within the first 12 months of ownership.

Applying for Early Release

The process for applying for early release of superannuation depends on the specific grounds for access. For severe financial hardship, compassionate grounds, and the First Home Super Saver Scheme, applications are managed through the Australian Taxation Office (ATO). Individuals initiate these applications online via their myGov account, linked to ATO online services.

Applicants must gather and submit all required documentation to support the claim. This may include medical reports, financial statements, statutory declarations, or invoices related to the specific expenses. While the ATO handles eligibility assessment, the superannuation fund is responsible for releasing approved funds once the ATO provides approval.

After submitting an online application to the ATO, processing can take approximately 14 days. The ATO may contact the applicant for additional information. Once the ATO approves the application, they will notify the individual and issue an approval letter. The individual then provides this approval letter to their superannuation fund, which typically processes the payment within three to five business days.

Taxation of Super Withdrawals

Understanding the tax implications of superannuation withdrawals is important, as tax treatment varies based on age and the type of withdrawal. Superannuation benefits are composed of a tax-free component, derived from after-tax contributions and certain capital gains, and a taxable component, which includes employer contributions, salary sacrifice contributions, and fund earnings. The tax applied to a withdrawal depends significantly on the individual’s age at the time of access.

For individuals aged 60 or over, most superannuation lump sum withdrawals from a taxed fund are entirely tax-free. If super is accessed as a regular income stream, such as an account-based pension, it is also generally tax-free for those aged 60 or older. For individuals under 60, any lump sum withdrawals are typically taxed at a rate of up to 22% on the taxable component, which includes the Medicare levy.

Payments made under the Departing Australia Superannuation Payment (DASP) are subject to specific tax rates, ranging from 35% to 45% on the taxed element, depending on the visa type. This tax is withheld by the super fund or the ATO before payment.

Under the First Home Super Saver Scheme, the assessable FHSS amount is taxed at the individual’s marginal tax rate, but with a 30% tax offset applied. This effectively reduces the tax payable on the released amount. Superannuation released due to a certified terminal medical condition is generally tax-free, regardless of the individual’s age. Super funds are required to withhold tax from certain payments before disbursement.