Accessing one’s super fund contributions before retirement is prohibited. However, super laws allow people to gain early access to their contributions under certain dire circumstances.
Circumstances that legally allow early access
Severe financial hardship
A member is eligible for access under severe financial hardship if and only if they are unable to meet reasonable and immediate living expenses. They must also have been receiving government financial support continuously for 26 weeks, including the time they applied for early access.
In both managed funds and SMSFs, members are allowed a withdrawal of $1,000 (unless the balance is below this amount) to $10,000 if they are experiencing severe financial hardship. However, only one withdrawal is allowed in any 12-month period. The actual allowable amount is taxable as a normal lump sum payment.
Members may apply for withdrawal on compassionate grounds if they or their dependents need financial assistance to pay for medical or death-related expenses, such as burial or funeral expenses. The money may also be used for expenses related to home and vehicle modifications to address severe disabilities.
A member can also apply for early withdrawal if they are solely responsible for paying the mortgage and is about to lose their home. In this case, a member is only allowed access to 3 months’ worth of repayment and 12 months worth of interest on the loan balance.
Withdrawals based on temporary incapacity may be allowed if a member temporarily needs to stop working due to a physical or mental disability.
This is only allowed for members who are not on sick leave (i.e., receiving benefits from the company due to their disability). The money should come from insured- or employer-funded contributions and given as an income stream.
Members who become permanently disabled and have stopped working due to their disability are allowed early access to their super benefits without cashing restrictions.
However, the member must prove that they are truly unable to work due to their disability even if their education and experience qualifies them.
Terminal medical condition
Members diagnosed with a terminal disease are allowed early access to their funds without restrictions. However, they must present certifications from two medical professionals that their condition will most likely result in death within 24 months. One of the certifications must come from a specialist in the diagnosed disease.
These allowances can only apply to expenses that have not been paid. Reimbursements are not allowed.
Eligible individuals must apply for an early release based on their circumstance during the time they are experiencing it.
Early release is only allowed for citizens and permanent residents of Australia or New Zealand. Temporary residents who encounter similar circumstances may not apply for early withdrawal unless they are permanently leaving Australia.
Other reasons to borrow money
An SMSF member may also borrow money from their Super fund to purchase a single asset or a collection of identical assets equal to its value.
A limited recourse borrowing arrangement (LRBA) should be used to purchase the asset. However, the rules are tricky and the arrangement requires careful planning to prevent breaching super laws.
This information has been sourced from the Australian Taxation Office and the Department of Human Services.