When we think of superannuation, we usually think of an account balance paid after you reach retirement age. However, there are particular circumstances where you can successfully apply for early release of your super account balance.
These circumstances can include (but are not limited to):
- Financial hardship
- Compassionate grounds
- Permanent incapacity
- Temporary incapacity
- Terminal illness
Financial hardship
You may withdraw some of your super if you’re experiencing severe financial hardship.
Unfortunately, a withdrawal for financial hardship is still subject to standard lump sum tax rates. This means anyone under 60 will be taxed between 17–22%, while those over 60 are exempt.
Any claim for financial hardship must be made through your super fund.
Compassionate grounds
You can withdraw a portion of your super on compassionate grounds, such as:
- Medical treatment and medical transport for you or your dependant
- Palliative care for you or your dependant
- Making a payment on a home loan or council rates so you don’t lose your home
- Accommodating a disability for you or your dependant
- Expenses associated with the death, funeral or burial of your dependant.
You cannot withdraw your entire balance, only what you need to cover unpaid bills. A claim on compassionate grounds must be made through the ATO, not your super fund.
Permanent incapacity
You can withdraw your super if a permanent disability means you’re unlikely to work again. This type of release is sometimes called a ‘disability super benefit’.
It’s helpful to know that you don’t have to prove that you’re unfit for all work—just work within your education, training and experience.
You can choose to receive your super as a lump sum or in regular payments. The exact amount of tax you’ll pay depends on whether you’re already receiving a disability payment and whether you’ve reached preservation age (that is, the retirement age where all people can legally access their super).
If you’re permanently incapacitated and looking to withdraw your super, we can help. Speak to one of our expert superannuation team today for free advice on your claim.
Temporary incapacity
You may withdraw some of your super if you’re temporarily unable to work due to injury or illness. This also includes situations where you’re working fewer hours.
You will receive regular payments (known as an ‘income stream’) while you can’t work. Any super withdrawn is taxed at the regular rate.
You will need to make a temporary incapacity claim directly through your super fund.
Terminal illness
You may be able to access your super balance early if you have a terminal illness.
To qualify you must get a certification (whether jointly or separately) from two registered medical practitioners. The certification must show that:
- Your illness or injury is likely to result in death within 24 months.
- One of the registered medical practitioners is a specialist in your illness or injury
- The 24-month certification period has not ended.
Your payment is tax-free if you withdraw a lump sum within 24 months of certification.
A terminal illness claim must be made through your super fund. If your fund does not allow early access due to a terminal illness, you can move your super to a different fund.
Additional reasons for early release of super
Your super benefit can also be released early if you require the money for:
- The cost of medical treatment (provided it is not commonly available in the public health system); or
- Medical transportation costs (required by either the fund member or their dependant); or
- Loan repayments (to prevent mortgage sale of property); or
- Special needs modifications to the home or transport of a severely disabled fund member (or dependant); or
- Palliative care or funeral expenses of a fund member or their dependant
Illegal release of super
Unless you have a valid reason (and sign-off from the ATO or your super fund), it is illegal to access your super balance early. Some promoters offer ‘early access’ by transferring your super into a self-managed fund. This is against the law and you can receive heavy penalties for participating. It’s always wise to speak to a lawyer before transferring your super between funds.
Making a claim for early release of super
You do not need a lawyer to make a claim for early release of super. However, a lawyer can ensure you uncover all your extra super fund entitlements. This includes lucrative claims for Total and Permanent Disability (TPD) and income protection.
At Monaco Solicitors, we focus primarily on permanent incapacity and TPD. Our team have helped thousands of clients secure their maximum super fund benefits. Whether you’re looking to start a claim, unsure if your injury qualifies, or just after advice on your super benefits, get in touch today.
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