Q: I am a small business owner in the incubus stage. I have just submitted my taxes for the first time in 3 years as the struggle to keep a small business alive has left me working to live. I am looking at a substantial tax payment and I am wondering if I can cash my super to pay off this debt.
Trish’s response: I am sorry to read about your cash flow issue. The super rules don’t specifically permit early release of super benefits to pay tax bills or other business debts.
If an individual applied to access super benefits under the severe financial hardship rules because of business debts, the individual’s super fund would knock back the application.
Accessing super benefits due to severe financial hardship
Background: In relation to severe financial hardship, your super fund makes the decision about whether a benefit can be released, and your super fund must ensure that the applicant satisfies certain conditions.
The first step in finding out whether you can access your super benefits is to talk to your super fund. Your super fund must check that you satisfy certain conditions before they can release your super funds due to financial hardship. The conditions are set out in the extract below (source: www.apra.gov.au/Superannuation/Other-Grounds-for-EROB.cfm):
“If you have been receiving an eligible income support payment from Centrelink, you may be able to apply direct to your superannuation fund/RSA for the early release of your superannuation funds.
To be granted an early release under this ground you must:
- be in receipt of a Commonwealth income support payment, and have been so, continuously, for the last 26 weeks; and
- satisfy the trustee/RSA provider that you are unable to meet reasonable and immediate family living expenses.
If you satisfy both of the above, the trustee/RSA provider may, in any twelve month period, release to you one lump sum payment. The lump sum payment will be no more than a gross amount of $10,000 and no less than $1,000 (or the balance of your benefit if it is less than $1,000).
If you are aged 55 years and 39 weeks or more, an alternative, optional, objective test of severe financial hardship may be applied to you. That is, you must:
- have received a Commonwealth income support payment for a cumulative period of 39 weeks after reaching age 55; and
- not be gainfully employed on a full-time or part-time basis on the date of your application to the trustee/RSA provider.
If you satisfy this test, the trustee/RSA provider may release your entire benefit.
In all cases, as part of the objective test, applicants will need to provide the trustee/RSA provider with a letter from Centrelink, the Department of Veterans’ Affairs or a Commonwealth Community Development Employment Project (CDEP) grantee organisation confirming that you meet one of these tests.”
The financial hardship provisions are also explained in the article 12 legal reasons to cash your super, and your super fund should also have more detailed information to assist you.
Compassionate grounds
If the bank is going to foreclose on your mortgage, then you may be able to access your super benefits under compassionate grounds. You then must apply to APRA. Your fund should also have information on this, and you can find additional information on compassionate grounds on the APRA website
I wish you the best of luck.
Related articles:
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Accessing super early: Not for business debts
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Accessing super early: Unemployed and in financial hardship
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Super for beginners, part 10: Can I use my super to reduce my mortgage?
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Super for beginners, part 12: I claimed my super due to hardship. Why do I have to pay tax?
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Unrestricted access to super, sometimes
Hi - I'm Trish Power, author of 
