Q: I have been unemployed for 10 months now and I am still having problems finding work. I’ve got bills to pay off and I’m finding it hard to do that with the tiny amount I get from Centrelink each fortnight. Is there any way I can use my superannuation towards my bills, due to my financial difficulties?
A: We’re sorry to read about your troubles. Yes, in certain circumstances individuals suffering financial hardship may be able to access a portion of their super benefits.
You must apply to your super fund to claim early access to your super benefits on the basis of ‘severe financial hardship’. Note that even if you satisfy the conditions for early access to super benefits due to ‘severe financial hardship’ you may belong to a super fund that doesn’t permit access on these grounds. As a preliminary step, check with your super fund to see whether your fund permits benefit withdrawals for financial hardship.
You must satisfy certain conditions for early access to super benefits based on ‘severe financial hardship’, which are outlined in a special regulation as part of the super laws (Sub-regulation 6.01 (5) and (5A) of the Superannuation Industry (Supervision) Regulations 1994), and also in Schedule 1 of the SIS Act.
You can claim your super early based on severe financial hardship. If you satisfy one of the following two scenarios:
- Received Commonwealth income support for a continuous 26 weeks, and you cannot meet your reasonable and immediate family expenses. You can access up to $10,000 in each 12-month period, and you must take a minimum of $1,000. If your balance is less than $1,000, then you must withdraw all of your super balance. OR
- Reached your preservation age and received Commonwealth income support for a cumulative 39 weeks after reaching your preservation age. If you satisfy the second scenario (preservation age and 39 weeks), you can access your full super benefit if required.
Note: Preservation age is the age you can access your super benefits, usually when you have retire, but not always. Anyone born after June 1964 has a preservation age of 60 years, and anyone born before July 1960, has a preservation age of 55 years. Anyone turning 55 on or after 1 July 1960, has a preservation age of at least 56 years and as old as 60 years, and since July 2017, at least 58 years, and from July 2018, at least 59 years (depending on date of birth). For more information on preservation age, see SuperGuide articles Accessing super: What is my preservation age? and Accessing super: Preservation age moves to 59 years and Retirement Age Reckoner: Discover your preservation age and Age Pension age.
I explain the eligibility rules for severe financial hardship in more detail in the SuperGuide article Can I access super early due to ‘severe financial hardship’?
Warning: If you are permitted to access your super benefits, then your super benefits are likely to be subject to benefits tax, which will be deducted from the super benefit before it reaches your hands (see SuperGuide article Super for beginners, part 12: I claimed my super due to hardship. Why do I have to pay tax?).
Accessing super early on compassionate grounds
If you are unable to meet the conditions required for ‘severe financial hardship’, you may be able to access your super early under ‘compassionate grounds’. If you’re eligible, you will have to apply to the Department of Human Services for early release of your super benefits. I explain ‘compassionate grounds’ in the SuperGuide article Accessing super early on compassionate grounds.