In this article we look at the rules around being able to unlock you super before preservation age (usually between 56yrs and 60yrs depending on your date of birth). However, you should only access your super early as a last resort. Money you take out early will decrease the effect of compound interest and leave you short of funds when you retire.
Seek financial advice before deciding if early super release is right for you.
Buying your first home
The Super Saver Scheme helps first home buyers gain a foot in the property market. It allows first home buyers to tap into $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 were able to 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. This scheme has the potential to accelerate your savings compared to putting your money in a bank savings account.
Once you achieve the $30,000 cap, you can withdraw these saving and out them towards a home loan deposit. If your saving with your partner, you can both individually make extra super contributions and roll these amounts into the same home loan deposit once withdrawn from your super.
This may 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.
You can find more detail on the ATO landing page or speak to Peer Wealth directly.
Server financial hardship
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 and you are unable to pay in any other way - such as by using savings or selling assets then you may have ground for early release of your super. You must however receive Commonwealth income support payments and show that you're legally responsible for the mortgage.
Medical treatment 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 your all out of options to pay.
More ways
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 you home or car for severe disability.
Other reasons include, if you're a temporary resident leaving Australia for good, or you have less than $200 in your super account.
Financial implications
If you are 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.
**The information on this article contains general information and does not take into account your personal objectives, financial situation or needs. If you require further information please don’t hesitate to contact Peer Wealth on (02) 8014 7608.