Australia: Accessing superannuation before retirement – navigating your superannuation policy in times of terminal illness or financial hardship.

Last Updated: 18 October 2018
Article by Thomas Felizzi

Generally individuals can only access their superannuation upon reaching retirement age, which is also known as the 'preservation age'. Although there are some situations in which this is not applicable. It is recommended that you obtain early legal advice when accessing your superannuation.

Permanent Incapacity Withdrawals

When you stop work before the retirement age due to illness or injury, you can make an application to release money in your superannuation account on the basis of Permanent Incapacity.

Most superannuation funds have terms in their policies which must be reasonably satisfied to allow for the release of superannuation monies on grounds of permanent incapacity. In general terms, Permanent Incapacity is defined as follows:

You are unlikely to engage in gainful employment within your education, training or experience again because of ill-health (physical or mental).

The superannuation fund will usually require medical certificates from two different doctors that support the above definition.

If you can obtain the release of your superannuation monies pursuant to the above definition you are generally able to access Total and Permanent Disability ("TPD") or Income Protection/Salary Continuance insurance benefits. This will of course depend on whether your superannuation fund has these benefits available to you.

There are also tax implications and you can be taxed up to 22% for an early withdrawal. It is important financial advice is obtained about this.

Terminal Illness

If you have a terminal illness and your doctors tell you that you have less than 24 months to live, you can also release your superannuation, without limit and usually without being taxed. Supporting medical evidence will be required but again, the exact type will change between different superannuation providers.

It is recommended that you obtain early legal advice when withdrawing your superannuation money on terminal illness grounds, as you may also have terminal illness insurance benefits . The withdrawal of one may affect the other so advice in relation to how to navigate your superannuation policy is important to make sure it does not effect other potential entitlements.

Financial Hardship Withdrawals

If you are in financial hardship you can also apply to withdraw your superannuation. Generally speaking, you will need to demonstrate that you have been receiving Centrelink benefits for over 6 months and you cannot pay for basic daily expenses. Ultimately, your superannuation fund has the discretion to allow the early release of your superannuation. There are also limits to the amount and the number of times you can release superannuation and again, there are tax implications. It is again important to obtain financial advice.

Compassionate Grounds

A superannuation fund can also permit a withdrawal of superannuation monies early on compassionate grounds. This is again done on a discretionary basis with tax implications.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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