Q: I owe approximately $190,000 to the bank on my 2-bedroom unit, and I would like to know if I can invest my $60,000 of super into the unit to reduce my mortgage repayments to the bank?
A: Superannuation is subject to special access rules called preservation. What this means is that you cannot access your super benefits until you retire after a certain age, or when you satisfy another condition of release, such as permanent disability or severe financial hardship.
In normal circumstances, before someone retires, it is not possible to access a super account in the same way as a bank account. On retirement however, you can cash out your super benefits. Before retirement, you can only access your super benefits in specific circumstances. We explain the conditions of release in the SuperGuide article Accessing super early: 14 legal ways to withdraw your super benefits.
Note: If an individual is struggling to pay a mortgage, and the bank is about to foreclose on the property, then it may be possible to access super benefits on ‘compassionate grounds’. The Department of Human Services administers the process for compassionate grounds for accessing super early, according to strict criteria. For more information on compassionate grounds, see SuperGuide article Accessing super early on ‘compassionate grounds’.
How can a fund member access super early for mortgage assistance?
DHS may authorise the release of your super for the purposes of ‘mortgage assistance’, if releasing the money will “prevent foreclosure of a mortgage on the person’s principal place of residence; or exercise by the mortgagee of an express, or statutory, power of sale over the person’s principal place of residence”.
Before the DHS gives permission for your super fund to release money to pay a mortgage, the DHS requires a written statement from the mortgagee (lender) that:
- the payment is overdue, and
- if the person fails to pay the amount, the mortgagee (lender) will foreclose the mortgage on the person’s principal place of residence, or exercise its power of sale over the person’s principal place of residence.
The written statement must also include the amount that is equal to 3 months of repayments under the mortgage, and the amount that is 12 months of interest on the outstanding balance of the loan at the time the statement is made.
If the DHS gives permission to access super early on compassionate grounds, then the person’s super fund can release the specified amount, and in each 12-month period that payment cannot exceed an amount equal to the sum of two amounts:
- 3 months of repayments
- 12 months of interest on the outstanding balance of the loan.
According to previous guidance from the DHS, the grounds for early release do not include a mortgage payment:
- where there may be future difficulty in paying, but the payments are not yet behind
- for payments that are behind, but the bank/lender has not yet decided to sell the property
- for a property or debt owned by one of your children or other family members or dependants
- for an investment property.
DHS also provides more details on the information required, including confirming your identity and registering for a Centrelink online account before such an early access application can be considered (for more information see SuperGuide article Coping with myGov: Why the government wants you to go online and the DHS web page Applying for early superannuation release).
Note: If you are considering applying for early access to super, also check that the specific rules of your super fund permits a super fund member to withdraw money under these circumstances.
For more information on accessing super benefits early see the following SuperGuide articles: