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The risks of early superannuation withdrawal
It’s the big question on everyone’s mind: Can I withdraw from my superannuation early?
The purpose of having a super fund is to accumulate it over time as a long-term investment to set you up for retirement. This being said, there are some limited circumstances where you can access your super balance early.
You will not be able to withdraw superannuation early unless you meet a particular condition of release. A withdrawal request must be written directly to the superannuation trustee, and any necessary evidence to support your circumstances.
These specific circumstances may be one of the following.
Compassionate grounds
If you cannot meet certain expenses such as medical treatment or palliative care for you or a dependent, prevent foreclosure of your home, funeral or burial costs for a dependent, disability aids for yourself or a dependent, or modifications to your home or vehicle, you may be able to apply on compassionate grounds to access your super early.
The Australian Taxation Office (ATO) will need to see the evidence to support your request, and you can only withdraw within reason from what you need.
Terminal medical condition
If two medical practitioners (one of whom is a specialist in the area related to your illness) can verify that you are not likely to survive 24 months from a designated date, then you may qualify for early access to super.
Temporary or permanent incapacity
If sickness or injury causes you to become temporarily or permanently incapacitated, you may be able to withdraw from your super. This would require medical evidence that you are permanently unable to work in any job you are qualified to do.
Experiencing severe financial hardship
If you are unable to make ends meet for your family, struggling to cover family living expenses, and have received income from Centrelink regularly for 26 weeks, you may qualify for severe financial hardship.
First Home Super Saver Scheme
You can withdraw specific contributions to buy your first home under the First Home Super Saver Scheme.
The First Home Super Saver (FHSS) Scheme lets first-home buyers use voluntary super contributions to boost their deposit savings in a tax-effective way. You can contribute up to $15,000 per year (to a lifetime cap of $50,000), with the ability to withdraw 100% of after-tax contributions and 85% of before-tax contributions, plus earnings.
Because super contributions are generally taxed at just 15%—often lower than your marginal rate—it can mean faster savings growth compared to using a regular savings account.
To be eligible, you must be 18 or older, have never owned property in Australia (except in certain hardship cases), and plan to live in the property for at least six months in the first year.
Withdrawals must be formally applied through the ATO before signing a property contract.
Does early release of super affect Centrelink?
If you do access your super, you must notify Centrelink within 14 days. Money taken from super is not assessed as income if you are an individual receiving a Centrelink payment. It could be treated as an asset if you do something particular.
It is essential to notify Centrelink and ask them to update your information on all receivable payments. An early super release may affect your family tax benefit, childcare subsidy, income support, parental leave pay, or Dad and Partner pay.
It may also affect your level of child support, either payable or eligible.
How to withdraw superannuation early
You can withdraw your super early, either through your superfund or the ATO, depending on your circumstances and the early access conditions you have met.
Speaking with your financial adviser when making a big call, such as dipping into your retirement savings, is essential. Even if you have met one of these conditions, this may impact your eventual retirement income, insurances, government benefits and any tax you might need to pay, so getting the right advice instead of going it alone will make all the difference to your future.
Superannuation early withdrawal: When can I withdraw funds from my super account?
So, when can you access your super tax-free? It all comes down to your birth preservation age (the age at which you can access your super fund).
You can generally access your superannuation at age 65, or from age 60 if you have permanently retired from the workforce or ceased employment after age 60. You can also access your super when you reach your preservation age and fully retire.
Speak to Elliot Watson Financial Planning about early superannuation withdrawal, and create a clear path forward for your financial future.
Disclaimer:
The information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information, you should consider its appropriateness regarding your objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser.
The views expressed in this publication are solely those of the author; they are not reflective or indicative of the licensee’s position and are not to be attributed to the licensee. They cannot be reproduced in any form without the author’s express written consent.
Elliot Watson Financial Planning Pty Ltd and its advisers are Authorised Representatives of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.
