Cracking open a nest egg early

Superannuation is stashed away for retirement, but it can be obtained earlier, writes Sophie Elsworth

TAPPING into superannuation early remains a hot topic, particularly for those looking to buy their first home, but many people access their super prematurely for reasons including illness and financial hardship.

While there remains strict rules around being able to access super before preservation age – which is usually between 56 and 60 depending on your date of birth – more Australians are getting the green light to access their super early.

Intrust Super’s chief executive officer Brendan O’Farrell said he’s seen a 72 per cent increase in members having compassionate claims approved by the Department of Human Services, allowing them to take out super earlier.

“These funds are released in specific circum-stances such as mortgage assistance, funeral assistance and medical treatment, in these instances the DHS determines the value,’’ he said. “Superannuation savings are for the long-term benefit of members to ensure the best possible opportunity to enjoy the later stages of their lives.”

Compassionate claims include strict guidelines relating to money needed for medical treatment, medical transport, to pay the mortgage, modifications to a home or motor vehicle because of a severe disability, funeral assistance and care for a terminal medical condition. You may also receive funds if you are totally or permanently incapitated.

In 2015-16 more than 29,300 applications to access super early based on compassionate claims were made and about half were approved.

The average amount of money released for each application was $13,520.

The Association of Superannuation of Australia’s director of research Ross Clare said there needs to be “some flexibility” in the super system for those who needed their money earlier than planned, but it should be a last resort.

“The system is quite tight, the hardship is not just people self declaring they are suffering hard times, there’s objective tests,’’ he said.

“For those under 55 generally the payments are taxed at 22 per cent and there’s the impact on their long-term retirement savings.”

You may also access your super early if you can prove you are in extreme financial hardship, which includes being on Centrelink income support payments for 26 weeks.