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.
A: We are sorry to read about your cash flow issue. The super rules don’t specifically permit early access of super benefits to pay tax bills or other business debts.
Accessing super benefits due to severe financial hardship
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. Access to super under the severe financial hardship rules can generally only be made for ‘reasonable and immediate family living expenses’.
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. Not all super funds permit early access of super benefits, even though you may satisfy the condition of release. If your super fund does permit early access, then the trustees of your super fund must check that you satisfy certain conditions before they can release your super funds due to severe financial hardship. The requirements for meeting the ‘severe financial hardship’ condition of release are explained in the SuperGuide article Can I access my super early due to financial hardship?, and your super fund should also have more detailed information to assist you.
Accessing super early on compassionate grounds
A person can also apply for early release of super on specific ‘compassionate grounds’, such as mortgage stress, medical treatment or costs related to looking after a severe disability. For example, 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 the Department of Human Services. Your fund should also have information on this. For more information on compassionate grounds see SuperGuide article Accessing super early on ‘compassionate grounds’, and the DHS website page Early Release of Superannuation.
Note: The rules for accessing superannuation benefits before retirement are also explained in the SuperGuide article Accessing super early: 14 legal ways to withdraw your super benefits , and more specifically, the rules applicable when personal or business debts are involved are discussed in the SuperGuide articles Accessing super early: Not for business debts and Accessing super early: Can I withdraw my super to pay off my debts?.