Most people know that superannuation cannot be accessed until retirement or in exceptional circumstances. What exactly are these exceptional circumstances have caused considerable confusion and allowed unscrupulous individuals to promote illegal schemes to access super early to pay for a holiday or buy a car.
To clarify, exceptional circumstances that allow you to access your super early usually relate to specific medical conditions or severe financial hardship. They broadly fall into 4 categories, compassionate grounds, severe financial hardship, terminal medical condition, and temporary or permanent incapacity.
Includes the need to pay for medical treatment for yourself or a dependent, to make a payment on a loan to prevent you from losing your home, to modify your home or vehicle for special needs of yourself or your dependent due to severe disability or to pay for expenses associated with a death, funeral or burial. The amount of super that can be withdrawn is limited to what is “reasonably needed”.
This condition may be satisfied if you have received Australian Government income support payments continuously for 26 weeks and are unable to meet reasonable and immediate family living expenses. The maximum amount that can be accessed is $10,000 at a time, and you can only make one withdrawal from the fund due to severe financial hardship in any 12-month period.
Early access to super may be allowed if you have a medical condition that is “likely to result in death within the next 24 months”.
The medical condition and prognosis will need to be certified by 2 different medical practitioners. One of the medical practitioners must be a specialist in an area related to the illness or injury. If you’re accessing your super early due to a terminal medical condition, you should be aware that not all super funds allow for these types of payments. Where your fund doesn’t allow for early access due to this condition, you may be able to rollover your super into a different fund which allows for these types of payments.
Temporary incapacity relates to physical or mental medical conditions which renders you temporarily unable to work (or to work less hours). You will be able to receive the super in an income stream over the time you are unable to work.
Permanent incapacity is also referred to as a “disability super benefit” the condition is met when the trustee of the super fund is satisfied that you have a physical or mental condition that is likely to stop you from ever working again in a job you’re qualified to do by education, training or experience. If you would like to receive concessional tax treatment of the early release of super, at least 2 medical practitioners must certify your condition and prognosis.
Therefore, unless your circumstances fall into one of the 4 categories above or the balance of your super account is less than $200, you will not be able to access your super until you retire. Be very wary of any individual or company purporting to allow you to access your super early when you don’t meet those exceptional circumstances. If you do go ahead and withdraw your super illegally, you could be hit with a range of penalties and interest charges or even a jail term depending on your involvement.