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What you should know about applying for compassionate release of superannuation?
According to Australian super laws, you can access your super on a few compassionate grounds before your retirement, such as when you need money to treat a life-threatening illness, accommodate a disability, or prevent a lender from foreclosing on your home.
However, applying for early release of superannuation on compassionate grounds requires you to meet stricter criteria and provide strong documentary proof. For instance, you need to submit a medical certificate confirming the risk to your life if you fail to get treatment for an illness.
Further, you need to submit your early super release application to the Australian Taxation Office (ATO) and get their approval before requesting your super fund to release the amount.
How can you access your super early on compassionate grounds?
- Confirm you qualify for early super release
Before you apply for an early withdrawal of your super benefits, confirm that you qualify to access super on compassionate grounds and meet all the stipulated conditions. You should, for instance, check whether you can access other funds to meet the expenses, which also ensures that your super is available for your post-retirement costs. If you have already made the necessary payments, you are no longer eligible to withdraw your super.
- Gather your documents
You should also check if you have the required documents and invoices to confirm your eligibility and the nature of the expense. Note that the documents you need can vary depending on why you are applying for withdrawing your super.
- Speak to your doctor or lender
You need to submit a report by a registered medical practitioner if you want to use super funds to pay for medical or palliative care or funeral expenses. Depending on the nature of the treatment required, you may also need a report prepared by a specialist in the specific field of medicine.
If you are seeking funds to prevent your home’s foreclosure, you need to submit the default notice issued by the lender and also need to prove that you own and live in the house. If you own more than one property, you may not qualify for compassionate release of super as you could sell one of the properties to raise the money needed.
- Submit your application
Once you’ve checked your eligibility and you’re ready with the paperwork, you can directly apply for early access on compassionate grounds through the ATO website. However, not all super funds allow early access, and it’s worth checking with your super fund first to see if they’ll allow it.
Is there a limit on the amount of super you can apply to release on compassionate grounds?
You can apply for compassionate release of super to pay for some expenses, with no upper limit in some cases, subject to certain conditions.
For instance, using super funds to prevent your home’s foreclosure is subject to an annual cashing restriction, which is the maximum amount you can withdraw in a calendar year. However, this amount cannot exceed the sum required to make three monthly mortgage repayments and one year of interest payments, and is divided between you and your partner if you are separately applying for compassionate release of super to prevent foreclosure.
Note that the ATO can reject your application if you do not have a sufficient balance across your super fund accounts.
Suppose you are withdrawing super for medical treatment at a private facility. You need to prove that the treatment is not immediately available through the public health system, and you cannot afford the private facility’s costs. In case you suffer a disability, you can seek funds to pay for purchasing assistive technology or upgrading your house or car to install a ramp or other supporting features.
Remember that you can only apply for funds to cover unpaid expenses for which you can submit the invoices.
Before you apply for compassionate release of super, you should also think about its impact on your future nest egg. The aim of superannuation is to fund your retirement, and taking out money from your super could reduce the size of your retirement fund.
Using your super to pay for an emergency should only be considered after evaluating its impact on your retirement fund. There might also be some tax implications when you withdraw your super early and speaking to a financial expert can help you make an informed choice.
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