Superannuation is designed to provide for retirement and is not intended to be available until retirement from the workforce.  However, the Government has recognised that people in severe financial hardship, or who face other problems specified by Government legislation, may have a legitimate need to access some of their superannuation early. 

Early release of superannuation is always at the discretion of your superannuation fund. You need to make initial enquiries with your fund if you are considering this option, and then advise your creditor or make an application to the Australian Prudential Regulation Authority (APRA) if you apply on compassionate grounds. 

The approval of APRA is required prior to any release for other specified grounds, which are limited to critical medical treatment not readily available through the public health system, palliative care, and mortgage repayments where the payment will prevent the mortgagee from foreclosing. 

Accessing your superannuation early

You should only consider using superannuation after you’ve investigated all other debt management options.  The short-term benefit of using your superannuation early needs to be weighed up against the longer-term disadvantages of decreasing the funds that will be available to you in retirement.

If you access your superannuation early to pay the arrears on your home loan in circumstances where you cannot afford your home in the long-term, all you have done is prolonged the inevitable sale of your house. You will have reduced the superannuation funds available to you in retirement or for another incident of financial hardship.

Early release of superannuation is always at the discretion of your superannuation fund. You need to make initial enquiries with your fund if you are considering this option, and then advise your creditor or make an application to the Australian Prudential Regulation Authority (APRA) if you apply on compassionate grounds. 

Grounds for the early release of superannuation

A large number of superannuation funds allow access to a lump sum from accumulated superannuation accounts once every 12 months if your application is based on one of the following grounds:

• specified compassionate grounds (to prevent sale of your house by your mortgage holder, or to pay medical, disability or funeral expenses); or
• grounds of severe financial hardship (for “reasonable immediate family living expenses” including loan repayments, rent arrears, outstanding bills, car repairs and medical expenses).

Applications for specified compassionate grounds are lodged with the Australian Prudential Regulation Authority (APRA) using the APRA application form (rather than writing a letter of request for funds release).

You can apply for early release of your superannuation funds to pay your mortgage on compassionate grounds if:

• you are in arrears and having difficulty paying, and
• your lender wants to sell your home because you are in arrears, and
• your name is on the mortgage documents (either individually or jointly), and
• the mortgage is for a property that is your normal place of residence (that is, not an investment property).

The amount you can access early on compassionate grounds depends on the balance of your account and the specific bills or debts you wish to pay. For mortgages, APRA can authorise the release of a lump sum equivalent to three months mortgage payments plus 12 months interest on the outstanding mortgage balance. 

How to apply on specified compassionate grounds

You should advise your mortgage lender (or other creditor if your request is for medical or funeral expenses) you have applied for release of superannuation funds and request that they stop further action being taken whilst your application is being processed.

APRA will assess your application within 10 days of receiving all required information and documentation. They will advise you in writing of their decision on the release of your funds.

Even if you obtain approval from APRA, your superannuation fund is not obliged to release your superannuation funds early if their policy disallows early access. 

How to apply on the grounds of financial hardship

You should apply directly to your superannuation fund for early release of funds on the grounds of severe financial hardship.  If your superannuation fund agrees to release your superannuation early, you may receive a lump sum of up to $10,000 for a one-off financial problem, such as paying outstanding bills. The funds cannot be used to pay day-to-day expenses, or cover debts that are not currently due (such as the full balance of a credit card or personal loan).

To be eligible you need to demonstrate to your superannuation fund:

• you have been receiving certain Centrelink allowances (including Newstart Allowance or Disability Support Pension; but not Austudy) for at least 26 weeks continuously (39 weeks if you are over 55); and
• you have requested and received from Centrelink within the past 21 days a standard letter that confirms you receive a required Centrelink allowance; and
• you have insufficient money to meet your ‘reasonable and immediate’ living expenses. 

Disadvantages of early release of superannuation

Early release of superannuation funds does have some serious consequences including:

• funds released prior to retirement are taxed at a higher rate;
• less superannuation will be available to you in retirement or if you face another period of financial hardship;
• unless early release pays off all your debts, you may pay your money to your creditors and still lose your home.