You may have heard about people accessing their super savings for weight loss surgery or buying a first home, and there are ways to access your superannuation well before retirement. Here we look at the rules around being able to unlock your super before preservation age (usually between 56 and 60 depending on your date of birth).
But a word of warning: you should only ever access your super as a last resort. Any money you take out early on will reduce the effect of compound interest and leave you short of funds when you retire.
Buying your first home
The Super Saver Scheme allows first home buyers to tap up to $30,000 of superannuation savings to help with a deposit."
First home buyers now have a way to gain a foothold in the property market with the Super Saver Scheme. Introduced in the 2017 Federal Budget, it allows first home buyers to tap up to $30,000 of super savings to help place a deposit on a house or apartment. However, these must be additional contributions – not from your employer-paid 9.5% superannuation guarantee.
From 1 July 2017 first home buyers could opt into the scheme by salary sacrificing or making voluntary contributions of up to $15,00 each year. These contributions are taxed at only 15% rather than the higher marginal tax rate that applies to your salary. Once you achieve the $30,000 cap, you can withdraw these savings and put them towards a home loan deposit.
If you’re saving for a home with your partner, you can both make extra super contributions individually. You can roll these amounts into the same home loan deposit once withdrawn from super.
This scheme has the potential to accelerate your savings compared to putting your money in a bank savings account. But it might not give you enough for a deposit, so be prepared to supplement with extra savings. Stamp duty, mortgage fees and lenders mortgage insurance are a few of the extra costs to consider.
Go to the ATO landing page for details of the First Home Super Saver Scheme or speak to a professional mortgage broker.
Severe financial hardship
Struggling to meet your home loan repayments is not usually grounds for early release of super. A more likely scenario is if you are about to lose your home to the bank because you haven’t been able to meet your repayments for an extended period.
You must receive Commonwealth income support payments and show that you’re legally responsible for the mortgage. It’s unlikely your claim will be successful if you can pay in any other way – such as by using savings or selling assets.
You may have heard of people paying for weight loss surgery from their super. Some super funds allow you to access funds early to pay for medical treatment. Life-threatening conditions, acute or chronic pain are often considered under compassionate medical grounds.
To access super for weight loss surgery, your weight must be affecting your health right now. You must also show that the public health system doesn’t cover the treatment, and you’re all out of options to pay.
A terminal illness is considered another reason for early super release. Some super funds will also agree to early release to pay for palliative care or a funeral for a dependent. Or to modify your home or car for severe disability.
Other reasons for early release: if you’re a temporary resident leaving Australia for good, or you have less than $200 in your super account.
If you’re below preservation age, you may need to pay a fee to your super fund for early release. Any money you get from super will be subject to tax. It may also affect your entitlements to family tax benefit, child care benefit and income support.
Seek financial advice before deciding if early release of super is right for you.