Early access to our super

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From social media platforms to conversations in the pub, people often want to know if they are able to access their super to pay for something they can’t afford.

There are circumstances where you can access funds early, but they are very limited and very strictly enforced.

People often ask why they can’t use it? It is their money after all. The reason the government doesn’t allow it is that the money is mandated savings to fund retirement.

The funds are taxed at concessional rates as compensation for not being able to use it until we retire.

Prior to superannuation, very few people adequately saved for when they were no longer receiving an income. If allowed to access super funds, too many people would do so and then not have enough savings to fund retirement years. This not only leads to a lower standard of living for these people but it is also a financial drain for the government.

There are some situations where superannuation can be accessed early. Death, terminal illness and total and permanent disability are all conditions of release that most people are familiar with.

The two circumstances that cause the most issue are severe financial hardship and compassionate grounds.

Two areas that cause confusion and, at times, a lot of misinformation is provided, are in relation to accessing funds for a medical procedure and to prevent foreclosure on a mortgage.

It is possible to access funds for those reasons, but it is very, very strict. For the medical procedure, the condition has to be life-threatening and/or be causing acute and chronic pain. Furthermore, the procedure must not be readily available through the public system.

The ATO clearly defines what they believe to be chronic and severe pain and what they determine is life-threatening. Life-threatening is defined as the likelihood that the condition will degenerate and lead to the client’s death within 12 months. It also states that this is for existing medical conditions not potential conditions.

The one I hear all the time is where people wish to use their superannuation for gastric band surgery. The argument being that, unless the person can lose weight, they are in a life-threatening situation. The ATO has specifically stated that this is NOT life-threatening by their definition and is not allowed.

The other condition of release that leads to confusion is the payment for mortgage assistance. Again, it is possible to do this, but under very limited circumstances.

The payment has to be for severe financial hardship specifically to prevent foreclosure and must be on the primary residence.

It cannot relate to a personal loan or an investment property loan and is limited to a maximum amount of $10,000 in any 12-month period.

Early access to your superannuation really is a last resort, and should be treated as such.

Although possible to access, it is very difficult, and will only be allowable in very limited circumstances and under extremely strict conditions.

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