Sometimes in life, things don’t go to plan, and financial hardship strikes just when we need it least.
The good news is that while unplanned debt can feel overwhelming, there is support out there to help you regain control of your finances – and your life – again.
If you meet the criteria for financial hardship, you could even be eligible for early superannuation release. Want to know more? Read on to weigh up whether it’s the right choice for you and your circumstances.
Who is eligible for early super access?
When we think of superannuation, we think of savings that can only be accessed when we retire, or reach preservation age. And while this is generally the case, there are certain circumstances where you can access your super earlier.
To safeguard Australians who may be experiencing severe financial difficulties, the ATO will allow you to withdraw some of your super to ease the burden of financial hardship. But only if you satisfy a set of criteria that assesses your eligibility. If you are deemed eligible, the usual conditions for super release may be waived.
What is financial hardship?
For the ATO to consider someone in financial hardship, it’s not as simple as having overdue bills or worrying about paying rent this month, (if this is the case you may be better off speaking to a debt relief expert who can help tailor a solution for you).
To be legally considered as someone who is experiencing severe financial hardship, the government will assess you against the following criteria:
- You have received government welfare benefits for at least 26 consecutive weeks (apart from ABSTUDY, Austudy or Youth Allowance)
- You’re still receiving those payments when you apply for early release
- You’re unable to pay for reasonable and immediate family living expenses such as overdue mortgage repayments, rental arrears, car repairs and urgent medical bills
How much can I withdraw from my super early?
If you satisfy the conditions for early release of super due to severe financial hardship, there are limits on how much you can withdraw. The minimum amount you can access is $1000, and the maximum is $10,000.
However, there are certain exceptions to this rule. If you have reached your preservation age and have been receiving DHS or Centrelink payments for 39 consecutive weeks and don’t have full or part-time employment, the amount of early super that you can withdraw is unlimited.
What is the penalty for accessing my super early?
While there are no direct penalties for withdrawing super early, it’s important to remember that the amount you take out will be considered an income stream and taxed accordingly. It can also affect whether or not you’re eligible for any welfare benefits, so it’s always best to speak to a financial advisor or debt relief professional to discuss how this will affect you before making a decision.
If you’re over 60, your withdrawal will be tax-free.
Can I access my super early to pay off debt?
While you can use your early release of super to help pay off debts, it’s important to understand the conditions you can use it for under the severe hardship provision.
Your payment can only be used to settle reasonable living expenses, and can only be used to settle payments that are in arrears. For example, you can’t use your early release super to clear a credit card debt or another loan unless it directly affects your everyday living expenses. If these are debts that you are concerned about, consider speaking to someone about credit card or debt consolidation. You may find that they can help you with a more appropriate solution for your situation.
How do I apply for an early withdrawal of my super?
If you believe you may be a good candidate for early release of super due to financial hardship, here’s how you can apply:
- Speak to your super fund to see if they allow for early release of super for financial hardship
- If they don’t allow for it, consider transferring to a super fund that does
- Fill out an application that explains the cause of your hardship and the living expenses that you are in arrears for
- Describe how you’ll use the money to address your financial hardship, if you are approved
- Provide evidence of your household income as proof that you can’t meet your expenses
- Ask the DHS or Centrelink for a financial hardship letter that outlines that you’ve met their requirements and submit it with your application
Remember that every super fund is different and may have different means for assessing your application. Once they have all your information, they will make a decision on whether or not your application will be approved.
Speak to Debt Negotiators today about getting out of debt, for good
While accessing the early release of super may be a good solution for some people who are experiencing hardship, in general, it should be treated as a last resort.
Super is your safety net for retirement and will make a big impact on how comfortable you are in your future. When you withdraw early, those losses crystallise due to the compound interest you lose on the withdrawn funds. If that’s worked out over a long period of time, those losses can be substantial.
Therefore, it’s always best to speak to someone you trust such as a solicitor, accountant or debt relief professional before you make a decision.
The friendly team at Debt Negotiators have helped thousands of Australians take back control of their debt in ways that are manageable and allow you to get back on your feet and simplify your finances.
Get in contact with the team today to have a chat about how you can get relief from the burden of the debt, and regain control of your life.