Early release of Super funds due to Financial Hardship or Compassionate Grounds.

If life has dealt you a financial blow and you have no-where else to turn, you might be able to access funds from super earlier than usual.

Here is the procedure.

You must apply to your super fund to claim early access to your super benefits on the basis of severe financial hardship.

You must satisfy certain conditions for early access to super benefits based on ‘severe financial hardship’, which are outlined in a special regulation of the super laws (Sub-regulation 6.01 (5) and (5A) of the Superannuation Industry (Supervision) Regulations 1994).

You can claim your super early based on severe financial hardship, if you satisfy one of the following two scenarios:

  1. Received Commonwealth income support for 26 weeks, and cannot meet reasonable and immediate family expenses. Schedule 1 of the SIS Regulations 1994, stipulates that you can access up to $10,000 of your super benefit in each 12-month period, and a minimum of $1,000. The 12-month period starts from the first payment.
  2. Reached preservation age (age 55 for those born before July 1960, and at least age 56 for those born on or after 1 July 1960) and received Commonwealth income support payments for 39 weeks (cumulative) after the person reached preservation age. Can access full super benefit if required.

For more detail of the requirements for the two scenarios above, please continue reading.

1. Received Commonwealth income support for 26 weeks

You are considered to be in ‘severe financial hardship’ under the super laws if the trustee of your superannuation fund is satisfied of the following two facts:

  • You have received Commonwealth income support payments for a CONTINUOUS period of 26 weeks. You can confirm this with written evidence provided by Centrelink or another Commonwealth department or agency (if relevant) responsible for the income support payments, and you must be in receipt of the income support when the written evidence is prepared. Income support includes NewStart allowance, Disability Support, parenting payment, carer’s payment, and widow allowance, but in this instance, does not include Ausstudy payments, or Youth Allowance paid to students in full-time study, AND.
  • You are unable to meet reasonable and immediate family living expenses.

If your super fund’s trustee considers that you satisfy the above requirements, you can access up to $10,000 in each 12-month period, and a minimum of $1,000 (unless your super benefit is less than $1,000 and then you must withdraw the entire amount).

 

Note: The letter or form from Centrelink (or other government department or agency) confirming your income support history must be dated no earlier than 21 days before you submit your application for early release to super fund. In other words, be sure to make your application as soon as possible after receiving written confirmation from Centrelink about your income support. According to Centrelink, rather than submitting a letter, you can arrange for your super fund to check your eligibility for income support by using Centrelink’s Customer Confirmation eService (if you have given your super fund permission to do so, and assuming your super fund has registered for the eService).

 

 

2. Reached preservation age and received Commonwealth income support for 39 weeks

Alternatively, you are considered to be in ‘severe financial hardship’ under the super laws if you satisfy the following conditions:

  • you have reached your preservation age (age 55 for those born before July 1960, and at least 56 years for those born on or after 1 July 1960).
  • you have been in receipt of Commonwealth income support for a CUMULATIVE period of 39 weeks after you reached your preservation age, and this is confirmed by written evidence provided by at least one Commonwealth department or agency responsible for the income support payments.
  • if you are working, you are working fewer than 10 hours a week. More specifically, at the date of the early access application, you were NOT gainfully employed on a full-time or part-time basis. Part-time work is defined to mean at least 10 hours a week, and less than 30 hours each week.

If your super fund permits early access on the basis of severe financial hardship, and you satisfy the above age, work and income support requirements, then you can access your ENTIRE superannuation benefit.

 

Note: The letter or form from Centrelink (or other government department or agency) confirming your income support history must be dated no earlier than 21 days before you submit your application for early release to super fund. In other words, be sure to make your application as soon as possible after receiving written confirmation from Centrelink about your income support. According to Centrelink, rather than submitting a letter, you can arrange for your super fund to check your eligibility for income support by using Centrelink’s Customer Confirmation eService (if you have given your super fund permission to do so, and assuming your super fund has registered for the eService).

 

Accessing super early on compassionate grounds

If you are unable to meet the conditions required for ‘severe financial hardship’, you may be able to access your super early under ‘compassionate grounds’. If you’re eligible, you will have to apply to the Department of Human Services for early release of your super benefits.

Warning: You may not be aware that if you are permitted to access your super benefits, then benefits tax is likely to be deducted from the super benefit before it reaches your hands.

What is ‘compassionate grounds’?

The general rule is that you can only access your superannuation benefits when you reach your preservation age (now at least 56 years and up to 60 years for those born on or after1 July 1960) AND you retire. Retirement, on or after preservation age, is considered a condition of release.

Another condition of release is ‘compassionate grounds’ and such circumstances include requiring help with expenses that cover specifically:

  • mortgage assistance (see later in article)
  • medical treatment (see later in article)
  • medical transport (see later in article)
  • modifications to home and/or vehicle where a fund member or fund member’s dependant suffers a severe disability
  • funeral or burial or other expenses related to the death of a dependant, that is, the deceased person was financially, domestically or personally reliant on you
  • palliative care for a terminal condition (that is, in the case of impending death) suffered by you or one of your dependants

Tip: The Department of Human services is also authorised to allow early access to super benefits where the circumstances are consistent with, or directly relate to, one of the specified grounds listed above (subject to a determination by DHS).

See later in the article for more information on accessing super early on compassionate grounds for:

  • mortgage assistance
  • medical treatment
  • medical transport

How do you apply on the basis of ‘compassionate grounds’?

You must apply to the Department of Human Services (DHS) (rather than your super fund) for early release on compassionate grounds. In the first instance, Centrelink prefers you register online using a MyGov account (see this link DHS register online), but also accepts paper applications. You can submit paper application by hand-delivering your application at the closest Centrelink service centre, or by post.

The contact details for DHS are set out below:

Telephone: 1300 131 060                                          Fax: 1800 228 455

Web: http://www.humanservices.gov.au/customer/services/centrelink/early-release-of-superannuation

By post:

Department of Human Services
Early Release of Superannuation Benefits
PO Box 7832
CANBERRA BC ACT 2610

Important: Before making an application to DHS, check that your super fund does permit early access to super benefits. Some super funds have special rules that stop you from withdrawing your super benefit early, even when you satisfy the ‘compassionate grounds’ condition of release.

Compassionate grounds: Mortgage assistance

You can apply for early release of your super benefits on compassionate grounds, if your home is going to be forcibly sold by the bank or financial organisation that lent you the money for your home mortgage, or the bank is going to foreclose on your mortgage, and you need your super benefits to prevent this from happening.

In addition to completing a special form, you must give DHS a written statement from your bank or financial organisation that states the following

  • payment of an amount is overdue and if the person fails to pay this amount, the mortgagee (lender) will foreclose the mortgage on the person’s principal place of residence; or exercise its express, or statutory, power of sale over the person’s principal place of residence.
  • the amount that equates to 3 months of repayments under the mortgage; and
  • the amount that is 12 months of interest on the outstanding balance of the loan at the time the statement is made.

Maximum amount that can be released for mortgage assistance each year: According to Schedule 1 of the SIS regulations, the amount accessed from the person’s super benefit for mortgage assistance must be a single lump sum, being an amount determined in writing by the Regulator (DHS), not exceeding, in each 12-month period, an amount equal to: the sum of 3 months’ repayment, AND 12 months’ interest on the outstanding balance of the loan.

Note: The ground of ‘mortgage assistance’ does not include circumstances where an applicant expects to have difficulty in making mortgage payments in the future, or for mortgage payments in arrears where the lender has not yet decided to sell, or for other people’s mortgage payment arrears (such as family members), or for a second property or investment property.

Compassionate grounds: Medical treatment

You can apply for early release of your super benefits on compassionate grounds, if you have medical costs for you or your dependant, and two medical practitioners (including one a specialist in the area of your illness) certify that the treatment is necessary to

  • treat a life-threatening illness or injury; and/or
  • alleviate acute or chronic physical pain; and/or
  • alleviate an acute or chronic mental condition

Note: The treatment must not be readily available through the public health system, and must not be covered by private health insurance or by workers’ compensation.

Compassionate grounds: Medical transport

You can apply for early release of your super benefits on compassionate grounds, if you have costs related to transporting you or your dependant to or from medical treatment, and two medical practitioners (including one a specialist in the area of illness) certify that the treatment is necessary to

  • treat a life-threatening illness or injury; and/or
  • alleviate acute or chronic physical pain; and/or
  • alleviate an acute or chronic mental condition

According to the SIS regulations (Regulation 6.19A) , ‘medical transport’ means transport, for medical attention, by land, water or air.

Note: The applicant must not have the financial capacity to pay for the medical transport, and the treatment related to the medical transport must not be readily available through the public health system.

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