Can I get an Early Release of My Super For Financial Hardship

Normally, when you have a job, your employer provides you with a salary and also puts at least 11.5% of it into a superannuation account. This super money is then invested for your future until you retire.

That’s for normal scenarios but life can have many ups and downs, and sometimes we face financial difficulties at the worst times. In such cases, covering debts and everyday finances can be overwhelming. Getting that accumulated super early can help take back control of finances and improve your situation.

All you need is to qualify for “severe financial hardship” and you can access your superannuation early. And by severe, we mean you can’t cover essential living expenses, like food or rent. Interested in learning more? Keep reading to find out if this option suits your needs and situation.

Facing Severe Financial Hardship? Get Your Super Early

Australians can access their super early in some cases. This includes certain situations like needing medical treatments, receiving palliative care, preventing their home from repossessing, and more. The best way is through severe financial hardship.

If you are unable to cover essential expenses for your family, like food, rent, or medical bills, withdrawing some of your money early can help. However, the Australian Taxation Office (ATO) has specific guidelines for what counts as “severe financial hardship”. We have covered everything, so read to know if you’re eligible, how much money you can get, and the procedure for early super release due to financial hardship!

Eligibility to Apply for Early Super Release

To be eligible for “severe financial hardship”, you must prove that you’re unable to cover your immediate family’s living expenses. But there are strict criteria you need to meet to qualify. Here are two key scenarios for eligibility:

1. Under Preservation Age Plus 39 Weeks

If you haven’t reached your preservation age (between 55 and 60, depending on your birth year), plus an additional 39 weeks, you must meet the following requirements:

You have been receiving eligible government income support payments (from Centrelink or the Department of Veterans Affairs) continuously for 26 weeks or more.
You’re still receiving the payment when you apply for early super access.
You’re unable to cover immediate family living expenses such as rent, bills, or food.

2. Reached Preservation Age Plus 39 Weeks

Once you’ve reached your preservation age plus 39 weeks, the eligibility requirements change slightly:

You’ve been receiving government income support for at least 39 weeks after reaching your preservation age.
You’re unemployed or working less than 10 hours a week when you apply.

Note!

Your preservation age is the age at which you can typically access your super if you’ve retired. This age is between 55 and 60, depending on when you were born.

Payments and Situations That Aren’t Eligible

It’s important to note that not all government payments qualify for early super-release. You won’t qualify if:

You’re receiving payments like ABSTUDY, Austudy, or Youth Allowance as a full-time student.
You had a gap in receiving income support payments during the required period.
You were in prison or overseas and it caused a gap of 14 days or more in your payments.

How To Apply

Meet the criteria? Time to get to the application process. The Australian Taxation Office (ATO) doesn’t handle these requests, your super fund does. Here’s how the process goes:

1. Check with Your Super Fund

Your first step is to get in touch with your super fund to find out if they allow early withdrawals under financial hardship. Every super fund is different, so make sure they offer this option. If they don’t, you may want to consider switching to a fund that does.

2. Provide Evidence of Financial Hardship

When applying, most super funds will require proof that you’ve been receiving government income support for a certain period. You can get a letter from Centrelink confirming this, or some funds can verify this directly online if you agree to it. To request the letter:

Call the Australian Services regular payment line and ask for a letter confirming your income support status.
Make sure to have your Centrelink Customer Reference Number (CRN) when you call.
The letter will be valid for 21 days, so make sure to submit it to your super fund within that timeframe.

3. Submit Your Application

Once you have all your paperwork in order, including your financial hardship letter from Centrelink and other required documents, submit your application to your super fund. Be sure to explain how you’ll use the money to address your financial hardship, like paying off overdue bills or covering essential living costs.

4. Receiving Your Funds

If your application is approved, your super fund will transfer the money to your bank account. This usually happens within five business days after everything is confirmed, though your bank may take another couple of days to process the payment.

How Much Can You Withdraw

The amount you can access also depends on your age:

Under preservation age: The minimum you can withdraw is $1,000, and the maximum is $10,000 in any 12 months. Keep in mind, you can only make one withdrawal per year.
If you’ve reached preservation age: There’s no limit on how much you can withdraw.

Tax Considerations

The tax you pay on your superannuation withdrawal is based on your age. If you’re under 60, any amount you take out will be taxed between 17% and 22%. But if you’re 60 or older, most of your withdrawal will be tax-free, unless part of it hasn’t been taxed yet.

Things to Consider Before Applying

While there aren’t strict penalties for taking out your super early, the money you withdraw is considered income and gets taxed. Plus, withdrawing early might affect your chances of getting welfare benefits. We recommend talking to a debt expert before making a final call. Read these effects of early super withdrawl:

Less Money for Retirement: Taking money from your super now means you’ll have less saved up for your retirement.
Losing Protection from Creditors: Normally, your super is protected from creditors. But once you take it out, that protection is gone, and creditors could go after your money.
Taxes: If you’re under 60, the money you take out early will be taxed. Around 22% of what you withdraw will be taken as tax, so you’ll end up with less than you expected.
Affecting Government Payments: In some cases, taking money out early can change the amount of government support you receive. This depends on things like what type of payments you’re on, how old you are, and how much you take out. It’s worth checking with Centrelink or the Department of Veterans’ Affairs to see if this applies to you.

Overall, we recommend that you keep the option of “early release of super for financial hardship” as a last resort. Superannuation is meant to support you during retirement, so taking it out early means less future financial security. And if you’re set to access super early then make sure to look out for scams.
If someone charges you for accessing your super early, take it as a scam. If you’re unsure about any contact you receive, reach out to your super fund or ATO directly to verify.

Yes, in some cases, you can access your super early if you’re going through serious financial problems.

You might be able to take out up to $10,000 from your super if you’re negligible. Check above to see.

If you have an SMSF, you can withdraw a lump sum once you turn 65, or if you’re between the preservation age and 64 and have retired. If you haven’t retired yet but fall within that age group, you can’t take out a lump sum.

Inam (CPA)

Qualified CPA, with a background in accounting and finance, I bring a wealth of knowledge and experience to My Tax Daily. Having worked with diverse clients across various industries, I understand the intricacies of individual tax laws and regulations. My commitment to making complex tax information accessible and understandable for everyone drives my writing. My content is rich in expert tips and latest tax information, curated to simplify your financial and taxation affairs.