A key purpose of superannuation is to discipline people to have funds set aside for retirement. However, some Australians might toy with the idea of getting early access to what is often described as a retirement nest egg, because of increasing cost-of-living pressures from rising interest rates, high inflation and increasing power costs.

Some commentators have also argued that young people ought to be able to access money set aside for superannuation early to buy their first home, given that they are nowhere near the stage where they ought to be thinking about retirement.

There was also a provision during the COVID-19 pandemic for people to access up to A$20,000 in two separate A$10,000 lots (once before and after 30 June 2020) provided they could meet specific conditions.

One or all of these can prompt clients to reflect on whether they can get early access to their superannuation if they hit a situation where they are in serious financial distress.

Circumstances for early superannuation access

There are specific circumstances in which somebody can crack open their superannuation funds, but the conditions are tight and a client pondering doing so needs to remember that somebody else makes the decision whether or not to release the funds.

Access may be granted on what are known as compassionate grounds and the Australian Taxation Office (ATO) lists a range of medical-related reasons that would fall into this category.

The financing of medical treatment and related transport is one reason for which superannuation could be accessed early, as is any palliative care required a client or a dependant.

Payments related to helping a client or their dependant manage a disability also fit under this category, as do payments of home loans or council rates to avoid the loss of a home. Expenses linked to the death of a dependant also fall into this category.

The ATO assesses these applications for early release and each circumstance is reviewed against requirements in the law.

There is no guarantee that funds will be released on compassionate grounds and the ATO warns people considering an application to await a decision before they book medical procedures or similar.

There is no guarantee that superannuation funds will be released on compassionate grounds and the tax office warns people considering an application to await a decision before they book medical procedures or similar.

Financial hardship and superannuation

Other avenues for early access to superannuation funds do exist, but the superannuation provider is the holder of the keys when it comes to access.

Anybody experiencing severe financial hardship may be able to draw some funds out of their superannuation but decisions about granting access to this category are made by the superannuation provider.

The tax rules that apply to lump-sum withdrawals also apply to early access granted for those experiencing severe financial hardship, so there are no special rules in these circumstances.

Other circumstances under which early access can occur include in circumstances that involve either a terminal medical condition, temporary incapacity and permanent incapacity. Each of these has its own conditions for being considered and specific timeframes within which a person must act to get access to funds.

Challenges for accountants

Members of Chartered Accountants Australia and New Zealand in practice need to remember some of the challenges in dealing with early access issues if clients approach them for a conversation, Tony Negline CA, CA ANZ’s superannuation and financial services leader, says.

Some members might be registered to provide financial planning advice, Negline says, but preparation of statements of advice in these circumstances might be expensive for the client because the preparation of advice takes time and costs more than the situation itself warrants.

He says that members that are not registered to provide financial advice may be able to talk to clients about what the law states and what they need to do to get early access, but they need to be wary that they do not stray into the territory of providing what looks and feels like financial advice or a recommendation for action.

Compensation access to superannuation

Laws prohibiting early access to superannuation are there to protect future retirement benefits of individuals. However, there have been circumstances where those prohibitions have been used to the advantage of people convicted of child sex abuse offences, to avoid paying compensation to the victims and survivors of their crimes.

In February 2023, CA ANZ and five other professional bodies lodged a submission with the Australian Government that supported getting laws changed, so that superannuation funds belonging to convicted child sexual abusers could be accessed early to pay compensation.

The submission also recommended that the government ought to take the measure further.

“[It] is our belief that once this policy is implemented and commenced, victims and survivors of other crimes will also seek access to an offender’s superannuation savings for unpaid compensation orders,” the submission said.

“We therefore believe that this policy should be extended to all serious indictable offences which we define as criminal trials involving a judge and jury and serious offences that an accused can elect to have heard by judge alone.”