Superannuation is a crucial financial tool designed to provide Australians with a comfortable retirement. While it’s generally a long-term investment, there are specific circumstances under which individuals are allowed to cash out their super funds. Understanding these conditions is essential for making informed decisions about your financial future.
Preservation Age and Retirement
The preservation age marks the point at which you become eligible to access your superannuation. As of 2023, the preservation age is between 60 and 65, depending on your date of birth. When you reach this age and retire, you can typically access your superannuation as a lump sum or choose to receive it as regular income through an account-based pension.
For those who have reached their preservation age but continue working, a Transition to Retirement (TTR) strategy allows access to a portion of their super. This involves starting a TTR pension while still working, providing a supplementary income stream. Keep in mind that there are limits on the amount you can withdraw under a TTR strategy.
Terminal Medical Condition
In unfortunate circumstances where an individual is diagnosed with a terminal medical condition, they may be permitted to access their superannuation early. This provision is designed to offer financial support during a challenging time.
Compassionate Grounds
Superannuation benefits may be released on specified compassionate grounds if a member has to:
- pay for medical or dental treatment for either themselves or a dependent or pay for transport to the treatment
- prevent their home from being sold by the lender that holds the mortgage
- modify their home or vehicle to accommodate their own needs, or the needs of a dependent, for a severe disability
- pay for palliative care for themselves or a dependent with a terminal medical condition
- pay for expenses associated with a dependent’s death, funeral or burial
You have to apply to the Australian Taxation Office (ATO), rather than to your super fund, for early release on compassionate grounds and you are not necessarily entitled to the full balance – the amount is limited to what is reasonably needed and the amount is taxed as a normal lump sum payment.
Severe Financial Hardship
If you’re facing severe financial hardship and have been receiving government income support for an extended period, you may be eligible to access your super early. However, strict criteria and limits apply, and it’s essential to consult with your super fund or a financial advisor to explore this option.
Permanent Disability
Individuals suffering from a permanent disability may be allowed to access their super funds early through a Total and Permanent Disability (TPD) insurance claim. The process involves demonstrating that you are unlikely to ever work again due to a disability.
Departing Australia Permanently
If you’re an Australian citizen or permanent resident leaving the country permanently, you may be eligible to claim your superannuation. This option is subject to certain conditions and requires the completion of specific documentation.
First Home Super Saver Scheme
The Australian government has introduced the First Home Super Saver (FHSS) Scheme, allowing individuals to make voluntary contributions to their super fund to save for their first home. Eligible participants can withdraw these contributions, along with associated earnings, to put towards their home purchase.
It’s crucial to note that accessing your superannuation early should be approached with careful consideration, as it may impact your retirement savings. Consulting with a financial advisor can provide personalized guidance based on your unique circumstances. Ultimately, understanding when you are allowed to cash out your super fund empowers you to make informed decisions that align with your financial goals and circumstances.
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Disclaimer:
The information contained in this publication is for general information purposes only, professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.