When to Access your super?
After an individual contributes to a particular super fund, the next question that will linger in mind include: when will I get access to the super, can I access earlier than that time? If I require the super now for personal reasons, will I get it?
In Australia, generally, a person can gain access to the super fund after reaching the preservation age or upon retirement. This age usually varies between 55 and 60. Therefore, you have seen that age is the core requirement for a person to get superannuation funds.
However, it is not the only way, as there are other multiple ways — referred to as conditions of release — through which one can access super fund Australian legislation. Therefore, it is possible to access your superannuation funds early on some special occasions.
When can you access your super funds early?
As highlighted earlier, there are two major cases where one can effectively access funds; reaching the age of 55 years or retiring from the workforce.
However, under certain circumstances, an individual would not need to wait until those events occur. Therefore, particular grounds can permit you to gain access to the super fund earlier than the retirement or preservation age. But, for such a kind of application to be approved, there are usually specific eligibility criteria that you must meet.
- Compassionate grounds
Australian law permits early access of super on compassionate grounds under limited conditions. For one to get approval for accessing the super funds on this grounds, you need to meet the Australian Tax Office (ATO) strict eligibility conditions if your super fund allows you access. Once you get approval for obtaining the funds on compassionate grounds, the amount will be taxed as a lump sum after it is paid.
These are some of the compassionate grounds that you can use to claim for an early superannuation release:
- Medical treatment: you might need the funds for payment of own medical treatment or transport or even to use it to cover for the treatment or transport of any of your dependents, like a child or spouse).
- Mortgage assistance: the funds can also be needed for payment of a mortgage or council rates so that you don’t lose your home.
- Palliative care: you may reach a point where you are making of the palliative care payment of yourself or a dependent.
- Home or accommodation: the funds can be useful to cater for expenses to accommodate either yourself or a dependant who has a severe disability.
- Funeral assistance: Payment of a dependant’s death, funeral, or burial expenses.
Currently, the government is thinking of extending compassionate grounds to include:
- Domestic violence victims’ recovery assistance.
- Dental treatment for chronic or acute pain conditions or life-threatening circumstances.
But for now, the only compassionate grounds permitted are the ones described above; payment of a medical, disability, or funeral expenses or covering for a house mortgage.
- Severe financial Hardship
Upon meeting certain strict eligibility conditions, the Australian law can make it possible for you to access funds early due to severe financial hardship.
If you meet the below criteria, The Australian Taxation Office (ATO) might allow you to get the funds:
- The Department of Human Services (DHS) has been giving you government welfare payments for at least 26 consecutive weeks. However, the exception here is when receiving Youth Allowance student (ABSTUDY) payments.
- When applying for early release, you were still receiving those payments.
- In a case where you can’t meet your reasonable and immediate family living expenses.
Due to hardship, you can apply to withdraw once in a 12-month period from your super an amount ranging between $1,000 and $10,000.
Once you have reached your preservation age plus 39 weeks, you have no cashing restrictions.
At the time of application, you should be receiving government income support payments for a cumulative 39 weeks period and not be gainfully full-time or part-time employed. The amount you receive will be taxed as a lump sum after payment. Rather than a single payment for this, the government is considering in future to have multiple payments in family and domestic violence cases.
- Temporary incapacity
Temporary incapacity can make an individual access super benefits as long as benefits emanate from specific sources.
Under the Australian super legislation, temporary incapacitation is where a person suffers mental or physical ill-health issues that make an individual to temporarily:
- Work less hours than normally.
- Not work at all.
You will have to supplement your income via your super if you become temporarily incapacitated. The two potential benefits that you will gain include:
- Either income protection insurance benefits.
- Or, any voluntary employer-funded benefits in your super fund.
Any super contributions that your employer made on your behalf which exceeds the 9.5% compulsory superannuation guarantee contributions are also included.
Both of the above potential benefits be converted to a lump sum amount but must be paid as a taxable income stream.
- Terminal medical condition
A terminal medical condition under Australian super law quickens access of super funds.
For an individual to be given the access, two medical practitioners should certify that the illness or injury is able to result in the person’s death within 24 months after issuance of the certificate.
Meaning, that at least one of those medical practitioners ought to be a specialist who has expertise in that particular terminal illness or injury.
Pegged on the fund’s rule, an individual can select to access some or all the super after getting a terminal illness diagnosis.
Withdrawals ought to be taken as tax-free lump sums even though the amount you can access has no legal restrictions.
- Temporary residents
People who are temporarily living in Australia are eligible to access their super fund. However, when it comes to an early release, there should be some specified compassionate grounds to get the super.
Departed temporary residents who have worked and earned super in Australia can access Departing Australia superannuation payment (DASP). However, for one to withdraw super in this case, the individual should give specific criteria and provide documentation to the government.
Unfortunately, Australian and New Zealand citizens and permanent Australian residents cannot access this facility.
For an individual to get accumulated super as a temporary resident, the person should have left Australia, and the temporary working visa should have expired.
Three factors determine the DASP of the Australian tax payable:
- If a person has a working holidaymaker visa or another visa type that will enable the individual to work in Australia.
- If an individual has DASP that entails taxable and non-taxable (tax-free) components.
- When the taxable DASP component of contains untaxed and taxed elements.
- Permanent incapacity
Under Australian law, permanent incapacity is one of the factors that can make an individual access your super benefits early.
Permanently incapacitation under the Australian super legislation where two medical practitioners certify that the person has physical or mental ill-health issues that will prevent the person from ever working again
After one is declared permanently incapacitated, the individual can access:
- Any total and permanent disablement (TPD) insurance benefits in the super fund — either as a lump sum or income stream.
- Any other accumulated super benefits the individual is entitled. When it comes to accessing own benefits, There are no restrictions on the amount, and one can access them either or as a regular income stream of payments or a lump sum
Payments will be tax-free if they are received via your super fund as TPD insurance benefits. However, in case you access permanent incapacity benefits from your super fund that have no TPD insurance payments, the payments are taxable.
The bottom line
An individual needs to meet a condition of release to access your super in Australia legally. There are different payment conditions and tax implications in different conditions of release.
The above article is information only and mot advice.