The Risks of Early Superannuation Withdrawal

The purpose of having superannuation is to accumulate it over time as a long-term investment, in order to set you up for retirement. This being said, there are only a handful of special circumstances in which you can access your super early.

So, can you withdraw from your super early? You will not be able to withdraw from your super unless you meet a particular condition of release. A withdrawal request would need to be written directly to the superannuation trustee, along with any necessary evidence to support your circumstance. These specific circumstances may be one of the following:

If you are not able to 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 for early access to super. The Australian Taxation Office (ATO) will need to see the evidence to support your request and you will only be able to withdraw within reason, to what you need.

If two medical practitioners (one of those being a specialist in the area related to your illness) can verify that you are not likely to survive a period of 24 months from a designated date, then you may qualify for early access to super.

If sickness or injury causes you to become 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 that you are qualified to carry out.

If you are not able to make ends meet for your family and have received income from Centrelink regularly for 26 weeks, then you may qualify for severe financial hardship.

You can withdraw specific contributions to buy your first home under the First Home Super Saver Scheme.

If you do access your super, you will need to 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 with it though. It is important to notify Centrelink and ask them to update your information relating to all receivable payments, as 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.

You can withdraw your super early either through your superfund or the ATO, depending on your circumstances and early access conditions that you have met. It is important to speak with your financial advisor when making a big call, such as dipping into your retirement savings. 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.

So when can you access your super tax free? This all comes down to your preservation age (that is, the age that you can access your superannuation). If you were born before 1 July 1960 you will be able to withdraw from your super when you turn 55. If you were born after that, the age ranges between 55 and 60. People aged 65 or over are able to withdraw from their super and also remain working. Speak to your advisor about your own circumstances.

Contact us

To get the right advice on the best time to access your super, based on your own individual situation, speak to a qualified financial adviser at Elliot Watson today. Call to make an appointment on 02 4038 1623 or email us.