Most working Australians will have a Superannuation account where money is deposited by their employer (and sometimes directly by the worker) on a regular basis. Ordinarily, moneys accumulated in your super fund will not be accessible by you until retirement age (preservation age).
However, there are some circumstances where you can access your super fund moneys prior to retirement age. These circumstances are often relied on by people with chronic illnesses like MS, cancers or chronic injuries.
Permanent incapacity withdrawals
When you cease work before retirement (or preservation) age due to illness or injury, you can apply to have your superannuation moneys released on grounds of Permanent Incapacity. The law says that superannuation money can be released early on the grounds of permanent incapacity if the superannuation fund is reasonably satisfied that you are unlikely to engage in gainful employment within your education, training or experience again because of ill health (physical or mental).
The superannuation fund will usually require that you provide medical certificates from two different doctors (ideally one GP and one specialist) which say that you are unlikely, because of illness or injury, to return to work that you are reasonably qualified/suitable for because of education, training or experience.
Usually, the tax payable on permanent incapacity withdrawals is up to 22% and the precise calculation of the tax payable will depend on how old you are when you withdraw the money. Younger people usually pay a lower rate of tax. There is no limit on how much of your superannuation can be withdrawn on permanent incapacity grounds at a time.
In many cases, if you are able to withdraw your money because of permanent incapacity, you may also be able to access any Total and Permanent Disability (“TPD”) or Income Protection/Salary Continuance insurance benefits that were held in your superannuation account when you last worked.
Many working people pay for TPD or other disability insurance benefits without realising. If you have ceased work due to injury or illness, you should make sure you claim any TPD or income protection benefits. We check the insurance in people’s superannuation accounts for free and tell them if they have, or have had, TPD or other insurance benefits when they last worked. If you are unsure, get in touch.
Terminal illness
If you are diagnosed with a terminal illness and your doctors tell you that you have less than 24 months to live, you can usually access your superannuation early. There is no limit on the amount that can be claimed, and the withdrawal is usually tax-free.
The requirements differ from superannuation fund to superannuation fund, however, you must usually provide the fund with two medical certificates from two different doctors (usually one specialist and one GP) certifying that you have less than 24 months to live.
We recommend that you be careful when withdrawing your superannuation money on terminal illness grounds, as sometimes you will also be able to claim terminal illness insurance benefits (which is usually the early payment of your death insurance benefit). Care should be taken as sometimes the terminal illness insurance benefit requirements differ from the terminal illness superannuation withdrawal requirement and accessing superannuation monies early on terminal illness grounds can impact your terminal illness insurance claim. This can get tricky, and it’s important that you seek advice from someone experienced in superannuation before accessing your money early.
Financial hardship withdrawals
Those who are in financial hardship can apply to withdraw their superannuation money on the grounds of financial hardship. In most cases, where a superannuation fund allows access to superannuation money on financial hardship grounds, a letter from Centrelink which says that you have been on Centrelink payments for more than 26 weeks and some kind of documentation which shows that you are unable to meet your household expenses is required.
Not all superannuation funds allow their members to access their superannuation money early on financial hardship grounds. If your fund will not agree, there may be little that can be done. Nonetheless, we recommend that you lodge a complaint with the fund’s internal complaint department. Although, you may need to consider other options.
If the reason that you are in financial hardship is related to injury or illness, you may decide to claim on your total and permanent disability or income protection instead of withdrawing your super money on financial hardship (or other) grounds. If injury or illness is a factor which is contributing to your financial hardship, please get in touch for a free superannuation insurance check.
Usually, you can only access $10,000 under each financial hardship withdrawal, and withdrawals are limited to one a year. Also, the tax payable on these withdrawals is usually 22%, however we recommend that you seek taxation advice.
Compassionate grounds
Medical & dental expenses
You can get early access to your superannuation account balance to pay for medical or dental treatment that is not otherwise reasonably publicly available.
This can sometime include access for medical or dental treatment which is publicly funded, but is subject to long waiting lists. Some things that we have heard of people accessing super early for include:
- stem cell treatment for multiple sclerosis (in Australia and overseas);
- cancer and other medications which are not yet publicly funded because they are off-label or otherwise in experimental phases;
- knee, hip or shoulder replacement surgeries (where there are long waiting lists); and
- any other medication, surgery or treatment which is not funded by Government programs.
It’s important to understand that these withdrawals are usually taxed.
Applications to withdraw on compassionate grounds to fund medical or dental treatment will need the support of your doctor that the treatment is required and not otherwise available.
Home or car modifications
You can get early access to super to pay for necessary modifications to your home or car required to accommodate an illness or injury.
These withdrawals are taxed and will require doctors’ support. Importantly, if (after you make the withdrawal) the modifications are later approved under a NDIS plan, you cannot get your super money back and the modifications will no longer be covered by the NDIS.
Financial hardship
You can access $10,000 from super once every 12 months if you are in financial hardship. To prove that you are in financial hardship, you need to be in receipt of income support payments from Centrelink for 26 weeks and get a letter from Centrelink confirming that this is the case. This letter is called a Q230 letter.
You also need to prove that you are unable to meet your immediate household expenses, but this requirement is not always strictly required. These withdrawals are taxed at 22%.
Contacting Berrill & Watson
📞 Melbourne: 03 9448 8048
📞 Brisbane: 07 3013 4300
📞 Anywhere else in Australia: 03 9448 8048
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