Tags: Money advice. Financial. Councillor. Super. Retirement
Your super is your retirement nest egg that may make the difference between having to scrape by on government benefits or enjoying more financial freedom from a super pension so withdrawing money before retirement should be a last resort. If you do fall on hard times and are unable to meet reasonable and immediate family living expenses, you may be able to withdraw some of your super on either severe financial hardship or compassionate grounds.
Most withdrawals will be taxed so before withdrawing money check the ATO website to confirm how much tax you will lose from your payment. To withdraw under severe financial hardship you need to have been receiving eligible government income support payments, for example, unemployment benefits, for at least 26 weeks continuously and you need to satisfy the trustee of your super fund that you can’t meet immediate reasonable family expenses.
Not all super funds allow you to withdraw monies under severe financial hardship so the first step is to check with your fund. If your fund does allow withdrawals the minimum amount that can be withdrawn is $1,000 (unless your super balance is less than $1,000) and the maximum amount is $10,000. You can only make one withdrawal from your super fund because of severe financial hardship in any 12-month period.
If you’ve reached your preservation age (from age 55 to 60, depending on date of birth), you may be able to receive your entire superannuation benefit provided that you’ve been in receipt of government income support for at least 39 weeks and you were not gainfully employed on a full-time or part-time basis at the time of application. You may be allowed to withdraw some of your super on compassionate grounds.
Compassionate grounds include paying for medical treatment for you or a dependant, modifying your home or vehicle for the special needs of you or a dependant because of a severe disability, paying for expenses associated with a death, funeral or burial of a dependant or making a payment on a loan to prevent you from losing your house. If your property is under threat of a forced sale, is your principal place of residence and you are legally responsible for the mortgage repayments you may be able to withdraw up to three months repayments and 12 months interest on the outstanding balance of the loan.
You may also be eligible to apply if you have arrears on council rates and your council is threatening to take possession of or sell your property. Before drawing down your super to try to save your property it is advisable to think about whether you may be better off selling the property and preserving your super. I have assisted many clients who have depleted their super and still lost their properties. Remember that money in super is protected from creditors in the event that you finish up with a shortfall on the sale of your property. As always do your own research.
Check out the ATO and Moneysmart websites. Be aware of scammers offering to get you early access to your super. They will try to convince you to let them take control of your fund and you may lose the lot. Peter Dallimore is a volunteer Financial Counsellor at the Bribie Island Neighbourhood Centre. He can be contacted via email at [email protected] or you can make an appointment to see him by calling 3408 8440. The Financial Counselling service is free.