Even with interest rates easing, the cost of living remains tough. In some cases, super can offer relief – especially under compassionate grounds or severe financial hardship.

Mortgage stress is hitting many Australians hard – and if you’re feeling the pressure, you’re not alone. Even though interest rates have started to ease, the cost of living is still putting pressure on many households. If you’re also dealing with reduced income due to illness, injury or job loss, it can be tough to keep up with mortgage repayments.

If you’re struggling to keep up with repayments, here are a few options worth exploring:

• Talk to your lender about temporary relief options.
• Check if you’re eligible for Government support like JobSeeker.
• Reach out to services like the National Debt Helpline.
• Consider selling investments.
• In some cases, you may be able to access your super early.

Accessing super early: what to know

Sometimes, when money gets tight, especially if you’re dealing with mortgage stress, you might wonder if you can dip into your super early. While it’s possible in some cases, it’s not automatic.

Superannuation can be accessed when you meet a condition of release. The intention of super is to access once you retire after your presentation age (age 60). Early access means withdrawing prior to retirement, before reaching your preservation age or before meeting another condition of release. To do this, you’ll need to meet specific eligibility criteria set by the government, such as severe financial hardship or compassionate grounds.

Compassionate grounds

This is for situations where you’re at risk of losing your home. If you qualify, you might be able to withdraw a lump sum from your super to cover up to three months of repayments and 12 months of interest.

The application goes through the Australian Taxation Office (ATO) and you can apply online via myGov. If approved, you’ll get a letter from the ATO, which you’ll need to give to your super fund to release the money. You can find out more through the ATO website.

Severe financial hardship

If you’re going through a tough time financially and are receiving Centrelink income support, you might be eligible to withdraw some of your super early under the severe financial hardship condition.

If you’ve been getting income support for at least 39 weeks after turning age 60 and you’re not working at least 10 hours a week, you can apply directly to your super fund to access your full super balance – no restrictions.

If you’re under 60 or haven’t met that 39 week threshold after turning 60, there’s still an option. You may be able to make one withdrawal per year, of up to $10,000, as long as:

• You’ve been receiving income support in the previous 26 consecutive weeks; and
• You’re struggling to meet reasonable and immediate living expenses, like mortgage repayments.

The application goes straight to your super fund. If approved, you can access between $1,000 and $10,000 in a 12-month period.

Remember, both the compassionate grounds and severe financial hardship options are there to help in tough times – but they come with conditions. So, if you’re unsure, start by contacting your super fund to find out – they can explain the eligibility criteria and guide you through the process. You may also want to speak to a financial adviser for personalised advice. They can help you understand what’s available and what’s right for your situation.

Is tax payable on the lump sum withdrawal?

If you’re under 60 and you access your super early, say, under compassionate grounds or severe financial hardship, just know that tax may apply.

Your super fund will usually withhold tax before making the payment and the amount depends on your age and the tax components on your super. Some parts of your super are tax free, others are taxable and any withdrawal has to be split proportionally between the two.

Taxation of lump sum payments

Component	Age	Maximum tax rate
Taxable (taxed)	< 60	20%*
	Aged 60+	Tax free

* Medicare levy and surcharge may also apply. If the super lump sum includes a taxable (untaxed) component, please seek specific tax advice.

Also, keep in mind that taking money out of your super could affect other things – like your eligibility for Family Tax Benefit or how much you need to repay on your HELP debt.

It’s a good idea to speak with a financial adviser or a registered tax agent. They can help you understand how it all fits together based on your personal situation.

Recontribute as soon as possible

If you do need to access your super early, it’s important to think about the long-term impact. Even a small withdrawal today can make a big difference to your retirement savings down the track – thanks to compounding returns.

If you do need to dip into your super, consider setting a goal to recontribute once you’re back on your feet. Even small amounts can help rebuild your retirement savings over time.

Financial stress can feel overwhelming, but support is available. Whether it’s help from your lender, government payments, support organisations or even your super fund in certain cases – exploring your options early and getting the right advice can make a big difference.

Source: MLC