When you can get early access to your super

IMAGINE you have run out of luck, are in deep financial strife and need early access to your superannuation.

While it might seem to be the only solution to getting some quick cash, there are limited circumstances where you will be given the green light to dip into your retirement kitty prematurely.

It will usually either be in the case of being in severe financial hardship or having a medical condition.

Verve Super chief executive officer Christina Hobbs said the critical word was “severe”.

Severe hardship usually means a person is unable to pay immediate living costs and has also been receiving some sort of financial government support continuously for 26 weeks.

Applicants are also able to tap into their superannuation early based on compassionate grounds, which includes paying for urgent medical treatment for themselves or a dependent, making a payment on a loan to prevent the person from losing their house, or modifying a home or vehicle for special needs.

Paying for medical costs has been the most popular reason to withdraw, with new goverment data showing that 83 per cent of the 31,100 applications approved last financial year were for healthcare – mainly weight-loss surgery and IVF.

Overall approvals have jumped 72 per cent in three years, sparking criticism of the practice. Death-related costs, including a funeral, can also be a reason to withdraw – there were 915 approvals last financial year – but Ms Hobbs warned processing paperwork involved in releasing funds took a month.

“It’s really not a good immediate solution anyway, and so people should really look harder,” she said.

My Wealth Solutions associate financial adviser Ross Pocock said accessing super early was usually unwise, and he urged people to consider the tax implications.

“Planning on accessing your superannuation funds early should only be done as a last resort,” Mr Pocock said.

For a lump sum withdrawn before retirement age, the tax rate is usually 22 per cent or your tax bracket rate – whichever is lower.

Mr Pocock said withdrawn cash from a super fund was also vulnerable to claims from creditors. He urged people to compare the short-term benefits of early withdrawal with the long-term pitfalls.

“You may end up just delaying the inevitable,” Mr Pocock said.

The ATO has warned people to be careful of shysters looking to get you to access your super.

“They might tell you they can help you withdraw your super to pay off credit card debt, buy a house or car, or go on a holiday,” the ATO website says.

“These schemes are illegal.”