EVERYTHING YOU NEED TO KNOW ABOUT MAKING AN EARLY CLAIM ON YOUR SUPERANNUATION DURING SEVERE FINANCIAL DIFFICULTY
When hard time hit, there are several ways that you can overcome the financial struggle – like consolidating debt, budgeting and downsizing. However, for some people, the hardship is so severe that they need additional help. Sometimes, accessing your superannuation early is the solution. Let’s explore further claiming financial hardship and early access of your superannuation.
Before you get too excited, accessing your superannuation early due to financial stress is a big process. Superfunds don’t want you depleting the funds before you are entitled by age to the money and the funds won’t hand it over because you’re doing it tough each week.
Why do you have superannuation? Your superannuation is collected so that you have money in your older age. Of course, when you are of retirement age, you can begin accessing your funds.
How can you access the cash within the superfund? The only other way that you can access your superannuation is if you can prove to the ATO that you are experiencing financial hardship.
What other reasons could I access my superannuation early? Superannuation may be released on compassionate grounds (not just for hardship) on the occasions of medical treatment or disability costs for yourself or a dependent, as funds towards a mortgage in the instance of preventing foreclosure or to pay for funeral expenses of a dependent.
How can you prove financial hardship and what proof may be needed? This is a challenging process to prove and you must be approved to receive the funds. You will need to provide to your superfund proof of your financial hardship included mortgage statements, letters of demands, overdue statements and the like. The process of becoming approved can take weeks or months even – and there is no guarantee that you will be approved. Accessing your superannuation early should be reserved as a last resort.
How much of my super can I access? Super withdrawals are paid in lump sums and taxed as income. You can only receive one payout from your superannuation for severe financial hardship each year (one 12-month period). The minimum withdrawal is $1,000 and the maximum amount is $10,000.
Will I have to pay tax on the money that I receive? Receiving funds from your superannuation will be taxed at the normal rate. Upon receiving funds and if you are receiving other government benefits, you will need to declare it as income.
More information? For more information about early access to your superannuation due to financial hardship, please contact the ATO directly or your accountant.
Related article: What you need to know about superannuation and financial settlements in divorce
