Do you need to be retired to access your super?

Apart from perhaps the family home, super is the biggest asset that most people will ever have. Unlike other assets and investments, however, the principle of super is that it should be preserved for retirement and not frittered away. While this generally makes good sense, life is not always so straightforward and there are times of need where you or your family could benefit greatly from gaining access to your super. So how flexible is the system and what are the rules around early access? Here’s a quick guide to the possibilities.

Can you just ‘retire’ at any age and claim your super?
What’s to stop you from simply saying you are retired at any age and claiming access to your super? It’s a fair question, but the Government quite rightly has imposed a fairly strict definition on what constitutes genuine retirement, in relation to super access.
Firstly, you need to reach your ‘preservation age’. If you were born before 1 July 1960, this will be age 55. Younger ages will have an older preservation age and this may be as late as age 60, if you are born after 1 July 1964.

Apart from this age restriction, you need to sign a declaration to confirm that you have genuinely retired (as in you have terminated your employment, not just moved to part time work under the same employment contract), with no intention to return to gainful employment. You are still allowed to work up to 10 hours a week under the terms of this declaration and you retain the right to return to full time work if your needs and goals change – however if you do return to work, future contributions will be preserved until you retire again. Once you reach age 65 the restrictions are relaxed and you are able to access your super even if you are still working full time.

A ‘transition to retirement’ strategy can give you partial access
If you have attained your preservation age, but are still in full time work, there is another option to gain partial access to your super, known as a ‘transition to retirement’ strategy. This involves drawing an income stream from your super as long as it fulfils certain limits and conditions. Using this strategy can net you some significant tax benefits which can enable you to either boost your super accumulation or reduce your working hours, without any reduction in take home income.
Correctly implementing this strategy will depend on your personal circumstances, so it pays to get some professional advice to see if it can work for you.

Accessing super in times of difficulty
Outside of the normal guidelines to do with retirement age, there are some other circumstances which will allow you to gain access to super. These relate mainly to situations where you are in dire financial difficulty or other personally traumatic situations, including:

  • Severe financial hardship - partial access may be possible if you find yourself in dire straits financially and unable to support your family. For example, if you are unemployed or unable to work and have claimed social security benefits for at least 26 weeks and find that this is insufficient to provide for family needs, you may be able to claim a single payment between $1,000 and $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.

  • Compassionate grounds – if you have incurred expenses due to a traumatic event impacting you or a dependent, (such as medical costs for a life threatening illness, palliative care costs or funeral costs), you can apply for access to your super.

  • Terminal medical condition – legitimate diagnosis of a terminal medical condition, (where death is likely within 12 months and has been confirmed by two doctors, one of whom is a specialist in the terminal condition), may enable full, tax-free access to your super as well as potentially any insured life benefits with a terminal illness clause. 

What if you leave the country?
Unfortunately, a permanent move to another country does not trigger immediate access to super unless you are a non-citizen or non-permanent resident.

A sickness or injury which leaves you totally disabled
A major disabling illness or injury may be enough to give you access to your super, but this is subject to strict conditions relating to how permanent and disabling your condition is. Basically you need to be completely unable to ever work in a job for which you are qualified by education, training or experience, before you could be eligible to claim, and this will have to be certified by two medical professionals.  If you have Total and Permanent Disability insurance through your super, this could generally be claimed in these circumstances.

Your family can gain access if you die prematurely
If you die, your spouse or other dependants generally have a right to obtain your accumulated superannuation benefits as well as any life insurance benefits you have in your fund. This may depend, however, on what ‘nomination of beneficiary’ you have made with your super fund or on the provisions of your will (if you have nominated your Estate to receive your super benefits), so to ensure part of your super does not end up in the wrong hands it’s best to obtain some professional advice to make proper arrangements for this possibility.

Have you or someone you know gained early access to your super? Tell us your story below.