Conditions of Release: when can you access your superannuation?

 

In superannuation, the term “condition of release” is an event that you need to satisfy or must have occurred relevant your situation before you can withdraw your superannuation benefits. For example, when you turn 65, you meet a condition of release and can withdraw your superannuation without restrictions.

Superannuation is a long-term tax-incentive saving for retirement. Due to an aging population, the government provides numerous tax incentives to encourage people to put the money in superannuation and save for their retirement rather than relying on the age pension. Some of these incentives are Co-contributions, Spouse contributions, contributions are concessionally taxed, tax is refunded if you’re earning less than $37,000, benefits are tax-free when you turn  60 and if you’re in the pension phase, the interest earned are not taxed at all and the list goes on. As you’re getting all these tax benefits, the government has to place a restriction on when you can access your superannuation.  Without restrictions, people would just withdraw their superannuation and spend it now and rely on the age pension when they retire.

Without meeting one of the conditions of release, you cannot legally withdraw your superannuation regardless of which super fund you belong to as the law governing superannuation is the same for every super fund. Beware of the illegal early release scheme operators where they charge you a hefty fee to illegally trying to access your superannuation before meeting on of the conditions of release. If you come across such a scheme, stay away and report them to the ATO.

In this article, I will briefly discuss conditions of release which are the only legal ways you can withdraw your superannuation. If you satisfy anyone of the following conditions of release, you can withdraw your superannuation:

On reaching your preservation age (between 55-60 years old) – the preservation age depends your date of birth – see the preservation table below obtained from the Australian Taxation Office.

Date of birth Preservation age
Before 1 July 1960

55

1 July 1960 – 30 June 1961

56

1 July 1961 – 30 June 1962

57

1 July 1962 – 30 June 1963

58

1 July 1963 – 30 June 1964

59

After 30 June 1964

60

Source: ATO

You can withdraw your superannuation benefits either as a lump sum or as an income stream when you reach your preservation age and permanently retire from the workforce. Your super fund will ask you to complete an application for payment in which you’re required to make a retirement declaration by stating that you have permanently retired and not intending to return to work again.

Age 60 and over – to access your superannuation, you need to have ceased a gainful employment arrangement with the employer who contributes superannuation guarantee contributions to your fund. You need to make a cease employment arrangement declaration when you complete the application for payment. This does not mean you have to retire; you can start another employment arrange at any time after that.

Age 65 and over – you can do whatever you want with your superannuation benefits; either leaving it in your super fund, commencing an income stream or taking it as a lump sum.

Transition to retirement income stream – after reaching your preservation age, you can commence a Transition to retirement income stream from which you receive regular payments without having to retire. This is just like a normal income stream except that you can only receive the maximum amount of up to 10% of your account balance each year. No restriction applies to the normal income stream payments.

Severe financial hardship if you’re suffering from severe financial hardship, you may be able to claim part of your superannuation benefits to meet the immediate and family living expenses. To be eligible, you must have received income support payments from Centrelink. The minimum amount to be released is $1,000 and maximum is $10,000 before tax in every 12 month period. I will provide more information on this subject in a separate post.

Compassionate ground – if you’re not qualified for an early release of your superannuation on grounds of severe financial hardship, you may be able to access it under compassionate grounds. There are five specific grounds under which you can apply to the Department of Human Services (DHS) to have part or all of your superannuation released before retirement. These grounds are Medical treatment and/or transport, Mortgage assistance, Modification to your home and/or motor transport, palliative care and funeral assistance. If approved by DHS, your Trustee will make the final decision whether or not to release your benefit. I will provide more information on this subject in a separate post.

Death – if you die, your superannuation will be paid to your dependants or legal personal representative.

Permanent incapacity – if you’re suffering from total and permanent disablement, you may be able to access all of your superannuation if the Trustee of your super fund is reasonably satisfied that you’re unlikely ever to engage in gainful employment for which you’re reasonably qualified by education, training or experience.

Terminal medical condition – if you have a terminal illness that is likely to result in death within 12 months, you can access your superannuation without paying any tax. To meet the requirements for terminal medical condition release, you need to provide two medical reports from registered medical practitioners who must have certified that you have an illness or injury that will result in your death within 12 months. One of the reports must come from a specialist.    

Under $200 – if you terminate employment with the employer who makes Superannuation Guarantee contributions to your super fund and the account balance is under $200 at the time of the release, you can access this amount now. The amount will be paid to you tax free.

Temporary residents – anyone who comes to Australia to work under an eligible temporary visa is entitled to be paid the compulsory Superannuation Guarantee contributions by their employer to a super fund on their behalf. When they eventually leave Australia, they can apply either to the ATO or their super fund to have superannuation paid to them. They can only apply for the payment after they have left Australia.

Unrestricted non-preserved component – if you have any superannuation benefits classed as unrestricted non-preserved, you can take this amount at anytime. All you have to do is apply to your super fund for payment. To determine if you have any unrestricted non-preserved amount, check your annual statements; you’ll find there is a section in there says Preservation components which contain 3 components – preserved, restrict non-preserved and unrestricted non-preserved.

I welcome any comments or questions you may have.