Early access to superannuation: the conditions that apply and the risks worth understanding
Superannuation is, for many Australians, the largest single asset they will accumulate outside of the family home. The preservation rules that govern its release exist for good reason — they protect members from depleting retirement savings prematurely. There are, however, defined circumstances in which early access is permitted. Understanding those circumstances precisely, and the consequences of stepping outside them, is the starting point for any client considering this path.
The two grounds for early access
Early release is available on two principal bases.
Financial hardship applies where a member has been receiving a qualifying Centrelink or DVA payment continuously for a minimum period and is unable to meet reasonable and immediate living expenses. The conditions are specific and the ATO assesses applications accordingly.
Compassionate grounds cover a defined set of circumstances: preventing the foreclosure of a mortgage on a principal residence, meeting the cost of medical treatment for a life-threatening illness or injury, or alleviating severe chronic pain where treatment costs cannot be met by other means. Applications are made directly to the ATO through myGov, supported by relevant documentation — medical certificates from treating practitioners, or mortgage correspondence from the lender as applicable. Where an application is approved, the ATO issues instructions to the superannuation fund to release the specified amount.
A compliance matter requiring attention
The ATO has identified a pattern of conduct involving medical and dental providers actively assisting fund members to access superannuation on compassionate grounds for procedures that do not meet the legislated criteria — including cosmetic dentistry. Advertisements promoting this arrangement have appeared on social media. The arrangement is not compliant, and the ATO has stated its intention to pursue both the providers facilitating access and the members who receive it.
Fund members and SMSF trustees should be aware that superannuation released outside the legislated conditions of release attracts significant penalties. The tax treatment of an unauthorised release is materially different from a complying release, and the financial consequences can exceed the amount released.
Members should also note that the application process is personal. No third party should be provided with access to your myGov account, and applications should not be made on your behalf by another party. False declarations in support of an application carry their own penalties.
In practice
The circumstances that lead a client to consider early superannuation access are often serious. Our approach is to work through the available options carefully before an application is made — to confirm that the applicable conditions are met, that the documentation required is in order, and that the tax and compliance implications of any release are understood in advance.
If you are considering an application for early access to your superannuation, we are available to discuss the process with you before you proceed.
Corinne Kirk
Partner, Accountant
1300 102 542 | 0405 106 401
corinne@egu.au
Related links:
This is general advice. It does not take account of your objectives, financial situation, or needs, and is not a substitute for advice that does. Before acting on anything in it, consider whether it suits your circumstances, and consider the relevant Product Disclosure Statement.