As you know, superannuation is a long-term savings for retirement and generally it cannot be withdrawn or accessed until you have reached your preservation age and retired from work or have met a condition of release (seeprevious post“Conditions of Release: when can you access your superannuation?” on how you can withdraw your superannuation).

However, if you’re suffering from financial hardship and unable to meet “reasonable and immediate family living expenses”, you may be eligible to apply for early release of your superannuation benefits on the grounds of severe financial hardship. A person is taken to be in ­­severe financial hardship if he/ she has received a Commonwealth income support payments from Centrelink or Department of Veterans Affairs for a continuous 26 weeks and that the person is unable to meet reasonable and immediate family living expenses.

What are immediate and family living expenses?

Unable to meet reasonable and immediate family living expenses mean there is a gap between your income and expenses which are associated with everyday living and you have no assets which could be used or reasonably sold to cover the gap apart from superannuation benefits. A family home is not considered as an asset for this purpose.

Some examples of living expenses are electricity bills, rents, costs of food and household repairs etc. While expenses associated with entertainment, traffic infringement notices, cigarettes are not considered family living expenses.

What is an “immediate” living expense?

An immediate living expense is one that is at the time of the early release application, due and payable. This also includes arrears. However, an anticipated expense for a service not yet provided is not considered an immediate expense.

With credit card debts, only the amount that is in arrears and amount billed as minimum amount due can be considered an immediate living expense.

What is a “family” for the purpose of family living expenses? 

The term family means you can apply for early release of your superannuation benefits to cover expenses for spouses, defacto partners, children, stepchildren, foster children, parents living with you and same-sex couples living in a bona-fide domestic relationship.

How much money can your superannuation fund release?

Only one application can be made every 12 months. The maximum amount can be released by a superannuation fund at any one time is $10,000 less any applicable taxes. The minimum amount is $1,000 unless your account balance is less than this amount then you can have your total account balance. Note that if your superannuation fund approves for a release of say $2,000, you cannot apply again for a further $8,000 within 12 months. You have to wait until 12 months have passed since your last application before you can apply again.

Your superannuation fund can only release as much as they believe you need. You must provide evidence to justify the amount you request such as bills, debts and your family income.

Eligibility requirements

Depends on your age, you can apply for early release of your superannuation benefits in one of the two ways:

1.    If you are under 55 and 39 weeks – 

  • you have been receiving income support payments from Centrelink (or Department of Veterans Affairs) for a period of at least 26 consecutive weeks;
  • you need to obtain a letter (Q230) from Centrelink to confirm you’re in receipt of these payments and give it to your superannuation fund;
  • complete your superannuation fund Application for payment;
  • provide a proof of identity document such as driver’s license or passport and
  • anything else your superannuation may request.

2.     If you have reached your preservation age plus 39 weeks – 

  • you have been receiving Centrelink (or Department of Veterans Affairs) benefits for a period of at least 39 cumulative weeks;
  • you need to obtain a letter (Q230) from Centrelink to confirm you’re in receipt of these benefits and give this letter to your superannuation fund;
  • if you can declare that you’re not gainfully employed on a full or part time basis, you don’t have to show evidence that you’re suffering severe financial hardship and you can access any amount you want without being restricted to the $10,000 limit;
  • complete your superannuation fund Application for payment; and
  • provide proof of identity document such as driver’s license or passport.

 Preservation age

Your preservation age depends on your date of birth, see the table below:

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

From   1 July 1964

60

 

Tax treatment of early released benefits

Superannuation is meant to be a long-term saving for your retirement. To discourage you from withdrawing it early, the government will tax you heavily if you’re under 55 years old. If you check your Member Statements, you’ll find that superannuation benefits usually have up to two components – Tax free and Taxable components.

Any amounts withdrawn from the Tax free component will have no tax deducted from it regardless of your age. So the higher amount you have in this component the better. However, the amount withdrawn from the Taxable component will have 21.5% tax deducted from it if you’re under 55.

Between 55 and 59 years old, the amount withdrawn from Taxable component up to $175,000 for 2013 financial year, will not be taxed. This amount is indexed annually. The amount over the threshold will be taxed at 16.5%.

Now, you cannot choose to withdraw the amount from the Tax free component only. If you have benefits in both components, the law only allows superannuation funds to withdraw the money from both components proportionately.

If you’re in financial hardship and you think you may be eligible to withdraw your superannuation early to cover the day-to-day living expenses, contact your superannuation fund for more details.

I welcome any comments or questions you may have.