Accessing Your Superannuation in Australia: When Can You Retire and Get Your Super?

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Introduction

Superannuation serves as a handy piggy bank for Aussies, stashing away cash for golden years. But folks are curious about the magic moment they can dip into this stash. Usually, super can be tapped into once you hang up your work boots and hit your preservation age, which sits somewhere between 55 and 60, depending on when you were born. Alternatively, reaching the ripe age of 65 unlocks the super goodies, regardless of whether you’re still on the job. Keep reading to discover more surprises about securing your future.

While the standard age for accessing superannuation is tied to retirement and age milestones, there are specific circumstances where you may be able to access your super early. This guide provides essential information on the eligibility requirements for accessing your super, both at retirement and under various conditions such as severe financial hardship or compassionate grounds, helping you understand when you may be able to access your super and plan for your financial future.

Understanding the Standard Age to Access Your Superannuation

Reaching Your Preservation Age and Retiring to Access Super

Preservation age is a cornerstone of the Australian superannuation system, representing the earliest age at which you may access your superannuation benefits upon retiring. This age is not fixed, as it depends on your date of birth, ranging from 55 to 60 years old. Here’s a breakdown of preservation ages by birthdate:

• Before 1 July 1960: 55 years old
• 1 July 1960 – 30 June 1961: 56 years old
• 1 July 1961 – 30 June 1962: 57 years old
• 1 July 1962 – 30 June 1963: 58 years old
• 1 July 1963 – 30 June 1964: 59 years old
• After 30 June 1964: 60 years old

Once you reach your preservation age, accessing your super generally requires meeting the ‘retirement’ condition of release. This means you must:

1. Have reached your preservation age,
2. Ceased gainful employment, and
3. Have no intention of returning to gainful employment, defined as working at least 10 hours per week for payment.

Accessing Superannuation at Age 65: Unrestricted Access

At 65 years old, Australians are no longer dependent on meeting retirement conditions to access their superannuation. Upon reaching this age, the condition of release is automatically satisfied, allowing unrestricted access to super benefits regardless of your work status—whether retired or still employed.

This unrestricted access at 65 provides considerable financial flexibility. You can:

• Withdraw your super fully as a lump sum,
• Commence a retirement income stream, or
• Opt for a combination of both.

These options enable you to use your superannuation to fund retirement or supplement income while remaining employed, giving you greater control over your financial future.

Getting Your Super Early: Conditions for Early Access

Severe Financial Hardship: Accessing Super in Times of Need

If you are experiencing severe financial hardship, you may be able to access your super early. However, eligibility involves meeting strict criteria, and the decision is handled by your super fund in accordance with the Superannuation Industry (Supervision) Regulations 1994 (Cth). It’s worth noting that the Australian Taxation Office (ATO) is not responsible for severe financial hardship applications; all applications must be submitted directly to your super fund.

To qualify as being in “severe financial hardship,” the following conditions generally apply:

• You are unable to meet reasonable and immediate essential family living costs.
• You have been receiving an eligible Commonwealth Government income support payment for a continuous period of 26 weeks.
• You are still receiving the eligible Commonwealth Government income support payment when you apply.

If you are under your preservation age plus 39 weeks, and meet the above conditions, you may be able to withdraw between $1,000 and $10,000 of your super. If your super balance is less than $1,000, you may be able to withdraw your remaining balance after tax. Note that you can only make one withdrawal per 12-month period under this condition.

For those who have reached their preservation age plus 39 weeks, different criteria apply. In this case, to access your super:

• You must have received eligible Commonwealth Government income support payments for a cumulative period of 39 weeks after reaching your preservation age.
• You were not gainfully employed when you applied.

If you meet the above eligibility after reaching your preservation age, there are no limits on the amount you can withdraw due to severe financial hardship.

Compassionate Grounds: Early Access for Specific Life Events

Early access to your super on compassionate grounds is allowed under certain well-defined circumstances. These are assessed by the ATO, which has no flexibility to modify the specific conditions under which approvals are granted.

You may be eligible to access your super for the following reasons:

• Medical treatment or transport for yourself or a dependant.
• Palliative care for a terminal illness affecting you or a dependant.
• Funeral, burial, or death-related expenses for a dependant.
• Modifications to your home or vehicle to meet the special needs of yourself or a dependant arising from a severe disability.
• Preventing foreclosure or forced sale of your home.

Applications for compassionate release generally pertain to unpaid expenses. However, if you’ve already covered the expense by borrowing money, you can use your super to repay the loan balance. To avoid processing delays or rejection, make sure to provide all required evidence to support your application.

Terminal Medical Condition: Accessing Super with a Life-Limiting Illness

If you have a terminal medical condition, you may have unrestricted early access to your superannuation benefits. Specific requirements include certifications by two registered medical practitioners, who must confirm that:

• You have an illness or injury likely to result in death within 24 months of the certification date.

One of these practitioners must specialise in the area related to your medical condition. As long as the 24-month certification remains valid, you may request the release of your super benefits. While there are no limits on the amount you can withdraw (subject to your fund’s rules), the amount will generally be tax-free if you withdraw it as a lump sum while meeting the condition.

Incapacity: Accessing Super Due to Temporary or Permanent Inability to Work

You may be able to access your super early if you are unable to work due to temporary or permanent incapacity.

Temporary Incapacity

If a physical or mental medical condition temporarily prevents you from working or reduces your ability to work, you may qualify for income protection insurance linked to your super. In such cases:

• Benefits may be paid as a taxable income stream, covering the period during which you cannot work.

Permanent Incapacity

Permanent incapacity, sometimes referred to as a “disability super benefit,” offers another route for early access. To meet this condition:

• You must have a permanent physical or mental medical condition that makes it unlikely you will ever work again in a role suited to your qualifications, training, or experience.

Even if you engage in light or casual work in a different field, you may still qualify. Withdrawals can be taken as a lump sum or an income stream, and concessional tax treatment for permanent incapacity requires certification by at least two medical practitioners.

First Home Super Saver Scheme: Accessing Super to Buy Your First Home

The First Home Super Saver Scheme (FHSSS) helps first-time home buyers save for a deposit by enabling voluntary contributions to super, which can later be withdrawn along with associated earnings.

Key details of the FHSS scheme include:

• You can withdraw up to $15,000 of voluntary contributions from any single financial year, with a total limit of $50,000 across all years, plus earnings.
• Eligible contributions include voluntary concessional contributions, like salary sacrifice, and voluntary non-concessional contributions.
• To qualify, you must:
  • Be 18 years or older.
  • Be purchasing your first home.
  • Intend to live in the property after buying it.

Before applying for the release of funds, you must request an FHSS determination from the ATO to confirm your maximum releasable amount. Additionally, you need to complete this step before property ownership transfers to you.

Accessing Super with a Small Balance Upon Terminating Employment

If you terminate employment with a super balance of less than $200, you may access your super early. This option aims to prevent small balances from being eroded by ongoing fees. It applies regardless of whether you resigned or were made redundant.

To access your super under this condition:

• Contact your super fund directly and provide proof of termination of employment, such as an employment separation certificate or a letter from your employer.

No tax is payable on super balances under $200 accessed via this condition.

Departing Australia Superannuation Payment: For Temporary Residents

If you were a temporary resident who worked in Australia, you may be eligible to withdraw your superannuation after permanently leaving the country under the Departing Australia Superannuation Payment (DASP) scheme. This option, however, is not available to Australian citizens, permanent residents, or New Zealand citizens.

Eligibility criteria for a DASP include:

• Your temporary visa must have expired or been cancelled.
• You must have left Australia permanently.

To apply, contact your super fund or the ATO if the super has been transferred to the ATO as unclaimed money. Ensure you have evidence of your visa cancellation and departure from Australia. Tax rates for accessing DASP differ and depend on whether you held a working holidaymaker visa or another type of eligible work visa.

Key Considerations Before You Access Your Superannuation Early

Understanding the Tax Implications of Early Super Access

Accessing your superannuation early involves tax considerations that may significantly impact your retirement savings. Early withdrawals are typically treated as super lump sums for tax purposes, which means they can be taxable depending on your age and the reason for the withdrawal.

If you are under 60 years old and access super early due to severe financial hardship or compassionate grounds, the amount withdrawn is generally taxed as assessable income. This means:

• It is included in your tax return.
• It is taxed at your marginal tax rate, though a tax offset may apply in some cases.
• The tax rate on the taxable component of the lump sum is usually between 17% and 22%.

For those 60 years or older, early super withdrawals are generally tax-free, unless the lump sum includes an untaxed element.

It is also crucial to remember that accessing your super early may affect your tax refund eligibility. Because early-release super forms part of your assessable income, you will need to declare any taxable component in your tax return. However, specific circumstances—such as accessing super due to a terminal medical condition—can make lump sum payments tax-free, provided the condition is met at the time of payment or within 90 days of receiving it.

Avoiding Illegal Early Access Schemes and Superannuation Scams

Be cautious of illegal early access schemes and superannuation scams, which can lead to significant financial and legal repercussions. These schemes often promise access to your super before you are legally entitled, exploiting individuals who may be under financial strain. Promoters frequently encourage participants to transfer their super into self-managed super funds (SMSFs) to facilitate improper access.

Key warning signs of illegal early access schemes include:

• Promoters suggesting that you transfer your super to an SMSF for early release.
• Targeting of vulnerable individuals facing financial difficulties.
• Claims that super can be accessed for any purpose once transferred to an SMSF.
• High fees or commissions charged by the promoters.
• Requests for your identity documents under suspicious circumstances.

To protect yourself:

1. Disengage immediately if approached with such schemes, and avoid signing any agreements or sharing personal information.
2. Keep in mind that legitimate early access is allowed only under limited circumstances, strictly defined by Australian law.
3. Be aware that participating in illegal schemes could result in severe penalties, including:
   • Additional income tax on withdrawn amounts.
   • Tax shortfall penalties.
   • Permanent loss of part or all of your retirement savings.

To ensure the advice you are considering is legitimate, verify the credentials of individuals offering assistance and consult a licensed financial advisor or your super fund if you are uncertain. Proactively checking these details can help you safeguard your retirement savings.

Conclusion

Navigating superannuation access demands a clear grasp of Australian legislation. While its primary purpose is to secure your retirement after preservation age, there are defined circumstances—ranging from reaching age 65 with unrestricted access to provisions for severe financial hardship, compassionate grounds, and the First Home Super Saver Scheme—that allow for early access.

Understanding these conditions is key to making informed financial decisions. For personalised guidance that maximises your superannuation benefits while ensuring compliance, contact Money Path today. Our Adelaide-based financial experts deliver the expertise needed to navigate superannuation effectively and plan for a secure retirement.

Frequently Asked Questions