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Superannuation: savings for later
Many people want to access their super before it matures. The idea of superannuation is that you save money and put it away to be used in your old age. With life expectancies for women now into their late eighties, and healthy men their late 70’s, people may live for twenty or even thirty years after they stop working.
When people seek early access to their super, for this reason, amongst others, generally speaking they will find it very difficult. In some situations, however, the Australian Taxation Office will permit early access to your super. Outlined below are the only three options you have for getting at your super early.
- Suffer permanent incapacity for work, or
- Possibly in cases of severe financial hardship, or
- On “compassionate grounds”.
Severe financial hardship
Cases of severe financial hardship are assessed case by case. For consideration you will need to contact your fund. If you fit the criteria, early release of benefits may be permitted but only if you satisfy the Trustee that you have been receiving a Commonwealth income support payment for a continuous period of 26 weeks and you cannot meet your reasonable and immediate family living expenses.
Compassionate grounds
This an area of highly subjective interpretation, and, again, your fund plays a key role in putting your case. In this situation, rules of law apply and are clearly stated. After notifying your fund, the Australian Prudential Regulation Authority (APRA) considers your application. It is then passed back to your fund so the Trustee can make a final decision.
Compassionate grounds may involve:
- medical treatment for serious conditions that are not readily available through the public health system,
- transport for medical treatment,
- changes to a home or vehicle because of a severe disability, palliative care, funeral and burial expenses, or
- to prevent the forced sale of your home by your mortgagee.
Illegal early super access
There are profiteers out there who may try to tempt people with illegal schemes that try to get your super money out early. Avoid them. You will save yourself from getting cheated out of your precious cash and from heavy tax and legal penalties. These schemes are sometimes promoted by word of mouth or shady advertising. If you hear of one, do the right thing; save other people some pain by reporting to ASIC or the Australian Tax Office (ATO) anyone who tries to talk you into getting your preserved benefits early through a self-managed super fund or for a fee.
Watch out for scams involving early release of your superannuation
If you're under the age of 55, watch out for financial advisers offering to quickly and easily arrange for your preserved superannuation benefits to be paid out in cash.“Some cases we've taken action against have involved the theft by unscrupulous advisers of all or part of the consumers' superannuation benefits”, said ASIC's executive director of consumer protection.
“In other cases we've seen financial advisers take large fees before forwarding the remainder of the super benefit to the client. You should be aware that you can only gain early access to your preserved super benefits in restricted circumstances”, said the director.
“In addition to the risk of losing your money, you may suffer taxation complications as a result of these fraudulent payments. Fraudulent early access also means that you no longer have these superannuation benefits available to you when you retire”.
You may think it won’t happen to you but these financial advisers have various methods they apply to get access to their client’s funds. One of these is to arrange for the super fund to pay the benefits to the advisor directly or as cash, rather than leaving the money in the fund to be drawn upon or transferring it to an eligible super fund.
Just so you know…
According to the ASIC website the Superannuation Industry (Supervision) Act, says that the preserved component of your superannuation benefits cannot be paid out in cash until you turn 65, retire from the workforce after age 55 or meet certain other limited criteria.
