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Can I take a loan from my superannuation fund?
Whether you’re struggling with mortgage repayments or need some extra cash for a holiday, you may be wondering can I take a loan from my superannuation?
Unfortunately, the answer is no, you can’t. Typically, you can only access your superannuation by reaching your age of preservation or meeting a condition of release, such as retiring after turning 60 or turning 65. You cannot withdraw from your super fund until then.
There are some circumstances where you may withdraw super without these qualifications. This includes
- if you suffer a temporary or permanent disability that prevents you from working;
- if you’re diagnosed with a terminal medical condition;
- If you are facing extreme financial hardship; or
- to pay for medical treatment.
Withdrawing your super under these circumstances comes with different rules for each circumstance. And you may also need to pay taxes when you withdraw the super benefits. Consider checking your super fund’s rules for withdrawal on compassionate grounds.
Can I take a loan from my self-managed super fund (SMSF)?
It is not likely that you could withdraw money from a self-managed super fund. There are strict regulations that allow for access to the funds held in any super fund, irrespective of the type of super fund.
Attempting to withdraw super benefits before you reach your age of preservation is illegal unless you meet one of the special conditions of release. When it comes to self-managed super funds (SMSF), if you’re the trustee of an SMSF and facilitate an illegal withdrawal, you could be removed as trustee, and even face legal ramifications.
Both individual and corporate trustees could be held liable for fines. Corporate trustees are required to pay heftier fines running to millions of dollars. SMSF members can only apply for releasing insurance benefits that they are eligible for. Even these need to be processed by the insurance company and not the trustees.
SMSFs are allowed to borrow from an external lender through their trustee, but only to invest in an asset such as property through a limited recourse borrowing arrangement (LRBA). This does not constitute or allow borrowing from the SMSF funds themselves.
The investment must align with the SMSF’s overall financial strategy. Also, the costs involved in the investment should not prevent SMSF members from accessing any benefits due to them when applicable. The property also cannot be occupied or rented by any existing SMSF member, including the trustees.
If you, as the trustee of an SMSF, are planning to enter into an LRBA, you should consult an SMSF adviser as well as the other trustees.
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