ACCESSING YOUR ANNUATION EARLY This factsheet focuses on Accessing Superannuation Early. This fact sheet is for information only. It is recommended that you get legal advice about your situation. For more information you can visit the website of the Department of Human Services (DHS) (www.humanservices.gov.au - search for accessing super ), and for general information on superannuation refer to the ATO website (www.ato.gov.au/super) or call 13 28 61. 1. Access at preservation age (now 55 but moving to age 60) 2. Transition to retirement if age 55 or more and still working 3. Accessing your superannuation early before you reach your super preservation retirement age. Superannuation ( super ) is a protected asset intended to fund your retirement. There are very limited circumstances where you may be able to access it early on specified compassionate grounds and severe financial hardship. Just because you can access it, does not mean you should access your super. As with all financial decisions, you need to think through the consequences, the pros and the cons. CALL THE CREDIT & DEBT HOTLINE ON 1800 007 007 PROS 1. Relief from current financial burden CONS 1. Loss of an asset that is protected in bankruptcy and otherwise protected from creditors until you take it out of the fund. 2. Taxed by the Australian Tax Office (ATO) on release at 21%. Financial Rights Legal Centre Inc. ABN 40 506 635 273 Fact sheets are information only and should not be relied upon as legal advice. This information only applies to NSW. 2014 Financial Rights All rights reserved. 3. If you use all of your super, you may lose your insurance benefits (e.g. income protection, death or total and permanent disability known as TPD ) that you may not have known you had. If your severe financial hardship is as a result of a permanent incapacity to work you may be losing valuable benefits. 4. It may not solve your financial problem and your super funds available for retirement will have reduced. 5. It may take too long it can take months to get your super released (if at all). If you do not meticulously supply all of the correct information your application may be sent back to you and you will be sent to the back of the queue. If you are relying solely on early release of super your financial circumstances may get worse while you are waiting. 1 FINANCIAL RIGHTS LEGAL CENTRE ACCESSING FINANCIAL HARDSHIP
STEP 1 WILL MY ANNUATION FUND RELEASE THE FUNDS? Not all super funds allow early access on either severe financial hardship or compassionate grounds. Check with them first. If they do not allow early access, and you have considered all of your options and access is appropriate you can switch funds and then apply for early access. STEP 2 AM I ELIGIBLE? You must be in Severe Financial Hardship Over 55 years old, not retired You must have: Received 26 weeks continuous eligible* income support Centrelink benefits; OR a minimum of 39 weeks cumulative eligible Centrelink benefits since reaching 55; AND you cannot be gainfully employed on a full or part-time basis on the date of your application to the Trustee If you are accessing it as an over 55 year old there is no restriction as to amount. Under 55 years old You must: have been in receipt of 26 weeks continuous eligible* income support Centrelink benefits If you are accessing it as an under 55 year old the amount released in a 12 month period as a single lump sum cannot be less than $1,000 and not more than $10,000. (*an eligible income support payments includes Newstart Allowance, but does not include austudy or youth allowance) Whether you are over or under 55, you need to obtain a Q230 (under 55) or Q251(over 55) form which can be obtained from the Department of Human Services (DHS) confirming that you have the eligible income for the 26 weeks. You then have 21 days only to provide the letter to your superannuation fund. Your fund may have its own form that you need to complete as well. Even if you have the DHS letter, you need to satisfy the superannuation trustee that you are unable to meet reasonable and immediate meet family living expenses. 2 FINANCIAL RIGHTS LEGAL CENTRE ACCESSING FINANCIAL HARDSHIP
Generally, you will need to: a. Set out the cause of your severe financial hardship; AND b. HOW you will spend the money if it is released. If there are specific bills that need to be paid, the fund will often require you to provide copies. c. You will often need to provide extensive evidence of yours and your family s income and expenditure. d. You also need to show you are in arrears, not just that you have debts If the trustee is not satisfied that the funds will alleviate your financial hardship then they may decline to release the funds. SPECIFIED COMPASSIONATE GROUNDS Super may be released on specified compassionate grounds which are defined in the Superannuation Industry (Supervision) Regulation 1994. The grounds are specific, and individual application forms can be found at the DHS website. In addition, you will need to provide supporting documentation. You need to read the application carefully and supply sufficient information to identify yourself and to provide adequate evidence of the grounds on which you are seeking access. Generally the grounds require you (or your dependent) needing: Medical or dental treatment Medical transport Mortgage assistance Modification of your home or motor vehicle Care for a terminal medical condition Funeral assistance AND you lack financial capacity to pay for the expense without accessing superannuation. It is a two-step process, where DHS provides initial approval and then you need to approach your super fund to approve the release. This fact sheet focuses on Mortgage Assistance. MORTGAGE ASSISTANCE Mortgage assistance is available to prevent your mortgage lender or Council taking action to sell your home for mortgage arrears or unpaid rates. Accessing your super should not be your first response to mortgage arrears or council rates arrears. First, you should try to negotiate with 3 FINANCIAL RIGHTS LEGAL CENTRE ACCESSING FINANCIAL HARDSHIP
your lender or council for a repayment arrangement or to capitalise the arrears (add it to your loan balance and let you pay it off over time). It is also recommended you see a free financial counsellor See Fact Sheet: Getting Help. Access to your super should only be considered if all other options have been exhausted. Even then, caution needs to be taken as you should be very certain you can pay your normal mortgage payments after the super is released. If you cannot, you need to consider selling your home as you risk the super you have withdrawn and your house. See Fact Sheet: Mortgage Stress - Do I need to sell my house? If you are going to sell your house anyway you should not access your super. Again, this will simply result in you losing your super, your house and the taxed portion of the released super (which will go to the ATO). APPLYING TO RELEASE MY FOR MORTGAGE ARREARS OR COUNCIL ARREARS Step 1 Speak to your home lender s hardship department or your local council. Negotiate a hardship arrangement. Even if you are applying for your super you still need a negotiate hardship arrangement while you do this. Speak to a financial counsellor or get legal advice about all of your options available to you. Step 2 - Check your super fund allows for early release and complete the application from DHS You will need to show DHS in your application that: 1. You have no other financial means to repay the arrears. You should speak to a financial counsellor or get legal advice. 2. It is your principle place of residence (not your holiday home or investment property). If you are not living in the property you should get legal advice. 3. The applicant (for super) is also the debtor (or one of the debtors) and responsible for making the mortgage repayments. Super will not be released to pay a mortgage in another person s name, unless it is your principal place of residence. 4. The lender has issued a statutory notice of default being a notice that clearly shows the lender intends to take action to foreclose on your principle place of residence 5. You must also provide all of the following: a. advice that, as at a certain date, payment of a specified amount is overdue b. advice that if the mortgagor (borrower) fails to pay the amount due by a certain date, the mortgagee will: 4 FINANCIAL RIGHTS LEGAL CENTRE BANKRUPTCY ACCESSING FINANCIAL HARDSHIP
commence or continue enforcement action to foreclose on the mortgage exercise an express, or statutory power of sale over the security property of the person s principal place of residence c. the street address of the property d. the amount that is equal to three months repayments under the mortgage e. the amount that is 12 months interest on the outstanding balance of the loan at the time the statement is made f. the mortgagee name and account number for the loan. An amount equivalent to three months repayments and twelve months interest is the maximum amount that can be released. The information required from the mortgagee may be set out in a single letter or document, or in separate letters or documents. NOTE: If you intend to sell your property, it is unlikely DHS will agree to the release. If you have your property on the market to sell as an alternative option in the event that DHS does not approve your application for release, you should provide a statutory declaration with your application stating that you intend to take the property off the market once the super is released. You should not swear false statutory declarations, as this may amount to an offence. Keep paying: You should continually keep your lender up to date as to the progress of your application. You should keep making payments of as much as you can whenever you can, because if your arrears exceed the amount available in your super, your application may be declined or your lender may still exercise their rights to repossess your home (because the super obtained is not sufficient to cover the arrears). You should also ensure that the lender does not take legal action whilst you are waiting as the legal fees may be added onto your loan account further increasing your arrears. If you receive a statement of claim (or summons) commencing legal proceedings you need to lodge a complaint in your lender s external dispute resolution scheme immediately! See Fact Sheet: Financial Hardship HOT TIP: Do not make promises that the super will be released by a certain date. You are not in control as to how fast DHS will process your application, or how long your super fund will take after that. Your application may get delayed for any number of reasons. You do not want to breach an agreement for things outside of your control. 5 FINANCIAL RIGHTS LEGAL CENTRE ACCESSING FINANCIAL HARDSHIP
Step 3 If DHS approves the release, you will need to send the original DHS letter to your super fund. If you have more than one super fund, you will need to provide a certified copy of the DHS approval. You will also need to comply with your super fund s requirements; this may include a separate form and identification verification. Step 4 - Pay the money to the lender. Sometimes your super will be released to you directly and not to the lender. You should make sensible decisions as to where the money should be paid. If you can save your home and even make a few payments in advance, you should consider doing so. If your lender says the money is not enough and they will proceed to repossess and sell the property regardless, you should consider putting some money aside for rent and bond on an alternative place to live. If you are not sure, speak to a financial counsellor or get legal advice. This is only a brief guide and it is recommended that you speak to a financial counsellor to discuss the best option for you in your circumstances. See Fact Sheet: Getting Help for a list of additional resources. Last Updated: June 2014 6 FINANCIAL RIGHTS LEGAL CENTRE FINANCIAL ACCESSING HARDSHIP