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When economic times are tough and there’s not much joy in your bank account, looking at your superannuation balance can give you hope – until you remember that you are not allowed to access it. 

Or are you?

Early access to superannuation is possible – but only for people who meet specific criteria.

If you fit any of the categories below, it’s worth talking to a trusted financial adviser to see if early access to your superannuation is right for you.

To be eligible for early access to your superannuation, check if your circumstances match any of the following criteria:

Compassionate grounds

Life can get challenging at times.

According to the Australian Taxation Office (ATO), the ‘compassionate grounds’ definition covers needing money to pay for:

• medical treatment for you or your dependants (including medical transport expenses)

• palliative care for you or your dependants

• disability-related expenses for you or your dependants

• costs related to death and funeral arrangements of your dependants

• mortgage payments to prevent you losing your home through home loan default

• payment of overdue council rates that put your property at risk.

Severe financial hardship

Exactly what constitutes severe financial hardship is determined by your superannuation fund, not the ATO.

Evidence that can help your application includes a letter from Services Australia to confirm you have received government income support payments for 26 weeks or more.

There is more information about how to apply for early super release because of financial hardship on the Services Australia website.

If you can successfully prove severe financial hardship based on your super fund’s assessment, you can apply for early release of some of your super.

But be aware that, even if you are experiencing severe financial hardship, the taxman doesn’t give you any special treatment. 

Under this category for early super release, withdrawals from your superannuation are paid and taxed as a lump sum (unless you’re over 60 and can withdraw tax free). 

That could mean what’s left of your withdrawal is not what you hoped for.

If you are under the age of 60, this tax rate is generally between 17% and 22%.

If your super is less than $200

A couple of reasons you have a super balance of less than $200 include: you found a ‘lost’ super account with a balance under $200; or you had a job and lost it before your super contributions went over $200.

The good news is that withdrawing a super balance that is under $200 won’t attract any tax payments.

Check the eligibility criteria for withdrawing super from ATO-held accounts.

Terminal medical condition

Superannuation can also be accessed early if you have a terminal medical condition.

According to the ATO, the criteria of a terminal medical condition includes:

• Two registered medical practitioners have certified, jointly or separately, that you suffer from an illness or injury that is likely to result in death within 24 months of the date of signing the certificate.

• At least one of the registered medical practitioners is a specialist practising in an area related to your illness or injury.

• The 24-month certification period has not ended.

To request access to early super release under this category, you’ll need to apply directly to your super fund. Your fund is required to pay your super as a lump sum and, if it is withdrawn within 24 months of the certification mentioned above, you’ll receive the payment without having to pay tax on it.

If your super fund rejects your application for early release due to a terminal medical condition, transferring your super balance to another fund provider is an option. Seek professional advice first.

To access any ATO-held super due to a terminal medical condition, you can apply online via your myGov account.

Temporary incapacity

Being temporarily unable to work, or needing to work reduced hours because of a mental or physical medical condition are all reasons you may be eligible for an early super release application.

But before you make the application to chip into your super balance, it’s worth seeing if you have any income protection or other insurance that may pay you some benefits.

Be aware that making a super withdrawal due to temporary incapacity is taxed as a super income stream with regular payments made over a period of time, rather than payment of a lump sum.

Super withdrawal due to temporary incapacity has no special tax rates, unfortunately – so that is something else to consider. If you don’t have any insurance benefits embedded in your super account, you may be eligible for early release in the severe financial hardship category explained above

Permanent incapacity

If you are permanently incapacitated, you may be eligible for early super release – sometimes referred to as a ‘disability super benefit’.

Your fund provider will require evidence to prove your permanent physical or mental medical condition that prevents you from working again. It’s also important to note that the definition of work can vary, depending on your fund. Although you may not be able to work in the field you were trained for and experienced in, you may be able to work in another form of employment, so this criteria can get complicated.

If your application is successful, the super payment can be made as a lump sum or as regular payments (income stream) and is subject to different tax components, depending on your circumstances. To receive concessional tax treatment, having your permanent incapacity certified by at least two medical practitioners is essential.

You’ll need to apply directly to your fund, under this criteria.

First home super saver scheme

If you’re saving for your first home, this scheme invites you to apply to release voluntary concessional (pre-tax) and voluntary non-concessional (post-tax) contributions you may have made to your super since 1 July 2017.

The ATO’s eligibility requirements must be met.

The bottom line

Taking money out of your superannuation is a big decision that can have serious financial ramifications in the long run.

And if you’re one of the 2.6 million+ Australians who collectively drained their superannuation balances of up to $20,000 during the pandemic’s early release invitation, considering taking even more out could dent your retirement plans (no matter how far away they seem).

If you do meet the criteria, though, accessing your super early is an option that can help you out of serious financial stress – especially if you’re facing an unexpected health outcome and need the financial support that early release of your super could deliver.

Go deeper: Superannuation insurance: this is what you’re covered for

Financial disclaimer

The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.