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  • Make sure it's legal to release a member's super benefits

    Super is money set aside during a person’s working life to support them in retirement, and as such, a member can't access their super until they retire or turn 65 – this is called meeting a condition of release.

    There are very limited circumstances in which a member can legally access their super early. This article discusses two such circumstances: compassionate grounds and severe financial hardship.

    Your obligations as a trustee

    As a self-managed super fund (SMSF) trustee, you're legally required to protect your members' super savings and can only release super when the law allows. How you can do this is explained below.

    Compassionate grounds: apply to the ATO

    The SMSF member must apply to the ATO for approval of early release of their super on compassionate grounds. Special circumstances for early release may include:

    • paying for medical treatment for a member or their dependant
    • making a payment on a loan to prevent them from losing their house
    • modifying their home or vehicle for the special needs of either a member or a dependant because of a severe disability
    • paying for expenses associated with a death, funeral or burial of a dependant.

    There are eligibility criteria that must be met before we can approve the release of super benefits on compassionate grounds. In addition, the fund’s trust deed must allow for it. Full details on criteria and how you or your members can apply for release under compassionate grounds are on our website

    If we approve the application, we'll send you (as the SMSF trustee) and the requesting member, an approval letter. You must not release the super until you receive this letter.

    Severe financial hardship – SMSF trustee documented approval required

    A member may also be able to access their super if they're under severe financial hardship. They don't need to apply to us for approval but, as the trustee you must ensure specific criteria are met. If the member hasn't reached their preservation age, before you can release money from the SMSF, you need to be satisfied they:

    • can’t meet reasonable and immediate family living expenses, and
    • they have received government income support payments continuously for 26 weeks and were receiving this support at the time of the application.

    You can only pay one lump sum payment of no more than $10,000 and no less than $1,000 to a member in any 12-month period.

    Where a member does apply for severe financial hardship, and they've met their preservation age plus 39 weeks there are alternative criteria to be satisfied.

    There are no cashing restrictions in these circumstances.

    Preservation age – conditions of release

    An SMSF can pay a transition to retirement income stream to a member who has reached preservation age and is still working, provided the trust deed of the fund allows this type of income stream to be paid.

    For more information on conditions of release once a member has met their preservation age, see Conditions of release: transition to retirement on our website.

    Remember to keep accurate records

    Any decision to release super under either compassionate grounds or severe financial hardship must be documented as required under the fund’s trust deed and kept by the fund for a minimum of 10 years.

    Consequences of illegal early access

    There are severe consequences for you and your fund if you or any of your members access super before legally entitled to do so. These could include:

    • the disqualification of trustees
    • the fund being made non-complying
    • administrative penalties
    • prosecution.

    There are also consequences for the member as the amount withdrawn will be included in their individual taxable income.

    See also:

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      Last modified: 23 Oct 2019QC 60451