When Can I Withdraw My Superannuation?

Superannuation is Australia’s retirement savings system. It involves money contributed by employers into a fund that is invested to provide income during an individual’s retirement. Its goal is to help Australians achieve financial independence in later years, reducing reliance on government-funded pensions.

Employers are required to contribute a percentage of an employee’s earnings into a chosen super fund. Individuals can also make additional voluntary contributions. Understanding when and how these funds can be accessed is important for financial planning.

Accessing Superannuation at Preservation Age

The most common way to access superannuation is upon reaching your “preservation age” and meeting a “condition of release.” Preservation age ranges from 55 to 60. For anyone born on or after July 1, 1964, the preservation age is 60.

Once you reach your preservation age, a condition of release is retirement. If aged between your preservation age and 59, “retirement” means you have ceased employment and declare no intention to work again. If 60 or older, ceasing employment is sufficient to access super from that employer. For individuals aged 65 or over, super can be accessed regardless of employment status or retirement.

Upon meeting these conditions, superannuation can be accessed as a lump sum or through a super income stream, also known as a pension. A Transition to Retirement (TTR) income stream allows access to super while still working, provided you have reached your preservation age. This option has certain limits on the amount that can be accessed annually.

Accessing Superannuation Early

While superannuation is primarily for retirement, limited circumstances allow for early access before reaching preservation age. These are known as early release conditions. Each condition has eligibility criteria and is assessed by the Australian Taxation Office (ATO) or your super fund.

Compassionate Grounds permits early release for needs such as medical treatment, palliative care, funeral expenses for yourself or a dependant, preventing mortgage default, or modifying a home or vehicle for a severe disability. Applications are made to the ATO, which assesses eligibility and determines the amount that can be released.

Severe Financial Hardship has different criteria based on government income support. If under preservation age, you must have received government income support continuously for 26 weeks and be unable to meet living expenses. If you have reached your preservation age plus 39 weeks, you must have received such payments for a cumulative 39 weeks since reaching preservation age and not be working when applying. Applications are made directly to your super fund.

Access is possible for a Terminal Medical Condition, defined as an illness or injury likely to result in death within 24 months, certified by two medical practitioners (one a specialist). Applications are made directly to your super fund, and payment must be a lump sum. For Temporary or Permanent Incapacity, you may access super if unable to work due to medical conditions. Temporary incapacity allows for regular income stream payments, while permanent incapacity can lead to a lump sum or income stream.

Temporary Residents Leaving Australia can access their super through the Departing Australia Superannuation Payment (DASP). To be eligible, you must have accumulated super while working in Australia on a temporary resident visa, your visa must have ceased, and you must have left Australia without another active Australian visa. This payment is processed by the ATO after you have departed the country. Additionally, Small Super Balances (under $200) can be withdrawn if employment is terminated or the account is a “lost super” account.

Applying to Withdraw Superannuation

Withdrawing superannuation requires submitting documentation. Before applying, gather information such as proof of identity (e.g., driver’s license or passport), super fund account details, and bank account details for payment.

Supporting evidence relevant to the condition of release must be collected. This includes medical certificates for incapacity or terminal illness, evidence of financial hardship, or proof of ceasing employment for retirement. Application forms are provided by your super fund, or by the Australian Taxation Office (ATO) for early release conditions like compassionate grounds or DASP.

Once information and forms are completed, the application can be submitted. The process involves contacting your super fund directly via phone, online portal, or mail to submit forms and documentation. For ATO-administered early release conditions, applications are submitted online through the ATO’s portal via MyGov. After submission, processing times vary, and the super fund or ATO may request additional information before notifying you of the outcome.

Tax on Superannuation Withdrawals

Taxation of superannuation withdrawals depends on your age and the components of your super balance. Balances consist of two components: a tax-free component from non-concessional (after-tax) contributions, and a taxable component from taxed and untaxed elements such as employer contributions and investment earnings.

For those aged 60 or over, lump sum withdrawals and income stream payments from a taxed super fund are tax-free. If under 60 and withdrawing a lump sum, the taxable component is assessable income. A “low rate cap” amount ($260,000 for 2023-24) allows the taxable component of a lump sum withdrawal to be tax-free for those under 60; amounts above this cap are taxed at 17% (including the Medicare levy) or your marginal tax rate, whichever is lower. From July 1, 2024, the low rate threshold will no longer be relevant for those over preservation age and 60, as withdrawals will be tax-free.

Super income streams (pensions) are taxed differently from lump sums. If 60 or over, income stream payments are tax-free. For those under 60, the taxed component of income stream payments is added to your taxable income and taxed at your marginal tax rate, though a 15% tax offset may apply. Early release withdrawals, such as for hardship or compassionate grounds, are taxed as normal super lump sums. For those under 60, these withdrawals are taxed at rates between 17% and 22%, unless conditions for tax-free access, like a terminal medical condition, apply.