Australians are sitting on in superannuation savings for retirement. But there are about whether they should be allowed to access some of that money early to help with costs of living.
And making an early withdrawal can have a big potential impact on your future retirement savings 鈥 especially if you are in your 20s or 30s.
So what are the rules around early withdrawal, and who do you have to convince if you鈥檙e making a claim?
Strict rules on early access
Superannuation savings are intended to help people cover their living expenses when they have left the workforce and are in retirement.
Taxes on super contributions are lower than income tax rates, and withdrawals after retirement are also at discounted tax rates.
Those low tax rates come with strings attached: rules that prevent people using their superannuation savings for other reasons than income in retirement.
For the most part, superannuation savings in Australia are not readily withdrawn . People can withdraw super from age 60 if they have stopped working, or from age 65 even if they have not stopped working.
The Australian Taxation Office is very clear that there are in which you can access your superannuation before retirement:
- on a range of compassionate grounds (such as for medical treatments, funeral expenses and preventing a forced sale of your home)
- a terminal medical condition
- severe financial hardship
- temporary or permanent incapacity to work.
But the rules are strict. And who you need to apply to will depend on your reasons for seeking to withdraw money.
For instance, if you , you need to apply via the tax office and meet .
But in other circumstances, such as , you need to apply directly through your super fund. Even if you meet all the criteria 鈥 which includes having received government income support payments for at least half a year 鈥 it鈥檚 up to the fund trustees鈥 discretion whether to say yes. The most you can withdraw for severe financial hardship is $10,000 in one year.
People often wish they could access their super for help with house deposits or home loan repayments. First home buyers may be eligible for the . But in general, just needing help for mortgage repayments is not going to be sufficient grounds to access your super savings.
Beware scams and misleading ads
The tax office has had to and social media claims, encouraging people to try to withdraw super on compassionate grounds, such as medical or dental expenses that are not absolutely necessary on health grounds.
The tax office says to be particularly careful with anyone suggesting super can be accessed to pay for cosmetic or elective procedures, as these treatments usually aren鈥檛 eligible.
If someone offers to help you apply to your super fund to take money out, that鈥檚 a red flag. It could even be a scam.
You can report ads or social media accounts making misleading statements about early access to super, either or by calling the tax office鈥檚 tip-off hotline: 1800 060 062.
Separately, unlicensed, real-time 鈥渃old calls鈥 about superannuation , under consumer protection law changes announced by Assistant Treasurer Daniel Mulino on Wednesday.
These rules will aim to prevent scammers or salespeople encouraging people to move their super, as happened with the First Guardian and Shield funds which later collapsed, affecting almost 12,000 people and about $1 billion in retirement savings.
Consider the long-term savings hit
There are lessons from the COVID pandemic about why withdrawal rules are so strict.
In 2020, the Coalition government鈥檚 allowed participants in financial hardship easy access to up to $A20,000 from their super because many Australians were doing it tough.
One of us (Susan) was involved in that combined data from one of Australia鈥檚 largest super funds, Cbus, with a survey of more than 3,000 of its members to examine why people withdrew some of their super savings.
A majority of people reported they did need the money immediately. But around one quarter (26.6%) said they were anticipating future needs.
Almost half (48.5%) said they thought about the decision for a week or less, while many also withdrew as much as they could. When asked about the impact on their long-term retirement savings, only 17% correctly estimated how large an impact it would have.
By the end of 2020, had made at least one successful application to withdraw from their super accounts, totalling about .
A 2024 of the COVID Early Release Super scheme found that a person aged 30 who withdrew the full $20,000 could be expected to retire with about $93,600 less in superannuation.
Protecting retirement funds
There will always be arguments for freeing up access to super a little.
But it鈥檚 important to keep of the superannuation system firmly in sight.
The system exists to help finance the dignified retirement of working Australians, together with other sources of support such as the Age Pension, in an equitable and sustainable way.
, Professor and Head of the Department of Banking and Finance, and , Professor, School of Private and Commercial Law,
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