In the event a member of a superannuation fund faces financial distress they can apply to have funds from their superannuation account released. There are two provisions by which funds would be released to a member, either through the severe financial hardship or compassionate grounds.
Understanding Severe Financial Hardship Rules for Super
Severe Financial Hardship rules allow for a member of a superannuation fund to apply to the Trustee for access to superannuation funds and assist in the payment of immediate living expenses.
The circumstances of the member dictate how much the member is eligible to receive.
Definition 1: 26 weeks on Commonwealth Benefits
If the trustee of the members superannuation fund can be satisfied the member has been the recipient of Commonwealth income support benefits for at least 26 weeks AND the member is unable to meet immediate and reasonable family living expenses then the Trustee can release funds to the member.
The amount released will be based on the expenses demonstrated by the member and will be a single amount between $1,000 and $10,000 pa.
Definition 2: 39 Weeks on Commonwealth Benefits and reached Preservation Age
If the member has reached Preservation Age plus 39 weeks, the member may be eligible to access superannuation benefits, based on the Severe Financial Hardship provisions.
The Trustee must be satisfied the member has reached preservation age and has been the recipient of Commonwealth income support benefits for a consecutive 39 weeks.
If the member meets this definition, the entire superannuation benefit is accessible.
Understanding Preservation Age
Preservation age can vary from individual to individual. This is because, as the rules for super were introduced, the government of the day did not want to surprise anyone with super changes. This meant there were some ‘phase-in’ rules that meant some people can access their super, before the age of 60. These rules for preservation age are as follows;
| Date of Birth From | To | Preservation Age |
| – | 30 June 1960 | 55 |
| 1 July 1960 | 30 June 1961 | 56 |
| 1 July 1961 | 30 June 1962 | 57 |
| 1 July 1962 | 30 June 1963 | 58 |
| 1 July 1963 | 30 June 1964 | 59 |
| 1 July 1964 and later | 30 June 1965 | 60 |
So, when considering preservation age and retirement, an individual must identify their date of birth, and then they can determine their preservation age!
Accessing Superannuation Benefits based on Compassionate Grounds
A member may be able to access their superannuation benefits based on compassionate grounds. For a release of a benefit under Compassionate Grounds, the member must apply to the regulator, the Department of Human Services.
Compassionate grounds release of benefits may be approved for the following reasons;
- To cover the cost of medical treatment or medical transport costs for the member or a dependant.
- Assist in the repayment of loan repayments to prevent foreclosure or mortgagee power of sale on the member’s principal residence
- Modify the principal residence of the member to cater to a severe disability of the member or a dependant.
- Meet a member’s palliative care expenses.
- Pay for a dependant’s palliative care, death, funeral or burial expenses
The amount to be paid out is to be determined by the Regulator. A formula determines the maximum amount that can be paid and is based on the reason for the release of funds.
Generally, when a superannuation fund releases funds to a member, tax is payable. There are exceptions to this rule, such as the payment of palliative care for the member.
It is important to note that the early release of super is for unpaid costs only – this means expenses that have been paid for by a friend/family member, on a credit card or any other loan etc cannot be repaid, using a release of super benefits.
There are also restrictions on the release of the benefit if the member does not have sufficient funds in their account to meet their total outstanding expense. In this situation the member must demonstrate to the regulator how they intend on meeting the difference between the benefit amount and the outstanding expenses.
This does not apply to funeral or palliative expenses.
Getting the Right Advice
Getting access to superannuation benefits through Severe Financial Hardship or Compassionate Grounds can be difficult.
If you or someone you know requires assistance with claiming a benefit, feel free to contact us at Insight Investment and Retirement services. We are more than happy to discuss ways in which we can help you.
Contact Us
At Insight IRS we offer all prospective clients a complimentary initial meeting.
Call 1300 551 267 or Email great.advice@insight-irs.com.au
