Most of us understand that the main purpose of superannuation is to provide financial independence in retirement. It’s not surprising then, that getting your hands on those savings is generally not possible before you reach retirement age. There are circumstances, however, that could grant you access to your super early. We explore how and when you may qualify to make an advance withdrawal.
Understand your preservation age
One of the fundamentals to understand on the subject of accessing your super, is to know your “preservation age”. This is the minimum age at which you can access your super benefits, assuming that you have already retired from the workforce.
This is not simply a single fixed age, rather it depends on when you were born. The youngest possible preservation age is 55, but only for those born before July 1960. For those born on or after 1 July 1964, preservation age is 60. For those of us in between, preservation age will be between age 56 and 60, based on a sliding scale determined by your date of birth.
Apart from reaching your preservation age, you need to provide evidence that you are officially retired by signing a declaration that you have no intention to return to gainful employment. It’s worth noting that you are still allowed to work up to 10 hours a week without breaching this declaration.
The rules change once you reach age 65, at which time you can access your super even if you are still working full time.
Gaining access while still working
There is a possibility that you can gain partial, limited access to some of your super while you are still working full-time, via what is known as a Transition to Retirement Pension (TRIP). If you have reached your preservation age, a TRIP allows you to access some of your super via an income stream payment limited to 10 per cent of your pension assets each year.
Until recently, there were significant tax benefits from taking a TRIP before you fully retire. These benefits have now been curtailed by rule changes, so it would be wise to speak to a professional financial planner to assess your circumstances and determine if a TRIP would benefit you.
Apart from the rules surrounding your preservation age and your actual retirement from work, there are other options for gaining early access to superannuation — generally related to situations where you are experiencing significant financial difficulties.
“Severe financial hardship” is one such situation. This involves gaining partial access if you are unable to support your family, for example, due to unemployment or inability to work. To qualify, you must have claimed social security benefits for at least 26 weeks and show evidence that it is insufficient to provide for family needs.
The rules allow you to claim up to $10,000 from your super for any 12-month period. If you are passed preservation age, you may be able to access your full superannuation benefit once you have been on social security benefits for at least 39 weeks.
Claiming on compassionate grounds
In certain traumatic circumstances, you can apply for access to your super on compassionate grounds. For example, if you or a dependent suffers a major health event resulting in significant expenses, you can state your case for gaining access to some of your super.
Severe medical conditions
If you can substantiate the diagnosis of a terminal medical condition that is like to result in death within 12 months, then you may be able to gain full, tax-free access to your super.
A major disablement due to illness or injury may also qualify you to gain access to your super, but there is stringent scrutiny relating to whether the condition is permanent and the degree of impairment it causes you.
Your untimely death will generally allow your dependants to gain access to your super in addition to any life insurance benefits your fund has, however there are some potential traps surrounding this. You need to ensure that the “nomination of beneficiary” declaration you have made with your fund is correctly set up, and that your will is correctly structured so your super benefits don’t end up being misdirected.
It is too late to attend to this once you are gone, so speak to a financial planner as soon as possible. Assessing your super and estate planning set-up will ensure that you are well-positioned and that your family is not left in the lurch in the most difficult of times.
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