Accessing super early: Not for business debts

Q: I am in partnership in a franchise business that needs some financial input at this time. We have been struggling since the beginning of the recent financial crisis, and have fallen behind on rent and we are just managing to keep up with service providers. I would like to withdraw my superannuation to invest into the business. I only have about $35-40k in super. I was born in 1953, and I believe that the funds would be better invested in the business to assist recovery. If I abandon the business I will have debts in the vicinity of $220k, bankruptcy is not a consideration (or option). I am single and have no dependants, however I do have a business partner who has family and a mortgage attached to the business. We both feel the best option is to continue to move forward with the business if possible.

I’m sorry to read about your troubles. Generally speaking, the super rules don’t permit access to super benefits to pay business debts. I have written about this issue in the article No super access for business debts or tax bills.

Note that if an individual is unable to pay a mortgage, and the bank is planning to foreclose, then the individual may be able to access super benefits on compassionate grounds. I also explain this option in the above article. If the Australian Prudential Regulation Authority does permit access to your super benefits, then note that some tax may be payable on the super benefit.

Retirement: Based on my calculations, your age is 57. What this means is that you have reached your preservation age (anyone born before July 1960 has a preservation age of 55). If an individual has reached preservation age and chooses to retire, then such an individual satisfies a condition of release and can access super benefits. Retiring obviously is not an option based on the details of your question.

TRIP: Another alternative for an individual who has reached preservation age is to start a transition-to-retirement-pension (TRIP) which permits you to access up to 10% of a person’s super benefit each year as pension income. Again, after allowing for the costs of setting up a TRIP, the maximum amount that can be withdrawn is probably a drop in the ocean when considering the circumstances that you’re facing.

Note: Generally speaking, superannuation benefits are protected from creditors in the event of a business collapse. The one major exception is where fund members make substantial contributions when a business collapse or bankruptcy is imminent. For more information on this type of scenario, I recommend that you chat to your business adviser.

See also

• No early super access for business debts or tax bills
• Accessing super early: 14 popular Q and As
• Accessing super early: Terminal illness
• Accessing super early: Serious illness or surgery
• Accessing super early: Terminally ill receive tax break

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