Getting money out of super
Conditions of release with cashing restrictions
|Former Temporary Residents - Departing Australia Superannuation Payment (DASP).|
|Severe financial hardship (trustee decision).|
|Compassionate grounds (application to APRA).|
|Termination of gainful employment (preserved amounts).|
|Attaining preservation age (Transition to Retirement - see Chapter 15 for further detail).|
|A release authority is given to the fund by the member or by the ATO. The amount released may be no more than the amount of the member's excessive tax liability.|
|A transitional release authority is given to the fund by the member. The amount released may be no more than the amount of the excessive non-concessional contributions specified on the release authority.|
The position prior to 18 December 2008
A member who held an 'eligible temporary resident visa' that had expired could request the fund trustee to release his or her benefits, provided they had permanently left Australia. An 'eligible temporary resident visa' was a visa included in a list in the SIS regulations. New Zealand citizens were excluded from these arrangements. A benefit payment - known as a departing Australia superannuation payment ('DASP') - was subject to withholding tax.
Temporary or former temporary residents had all the conditions of release available to them.
The position from 18 December 2008
In short the main changes are a new definition of temporary resident, the requirement for trustees to pay to the ATO superannuation benefits for former temporary residents as unclaimed moneys (with the member's right to claim back the benefit from the ATO), and from 1 April 2009 a limited number of conditions of release available to both temporary and former temporary residents.
1. Who is a temporary resident?
A temporary resident is defined now as the holder of a temporary visa under the Migration Act 1958. Such a visa is for a specified period, until a specified event happens or while the holder has a specified status.
The changes do not apply to an Australian citizen, a New Zealand citizen, a permanent resident or a holder of an Investor Retirement visa or a Retirement visa.
2. Requesting benefits
A temporary resident who has left Australia and whose visa has ceased to be in effect can request cashing of his or her benefits, as a DASP. The trustee must cash the benefit, on being furnished with the prescribed evidence of the temporary visa having lapsed and the member leaving Australia. These arrangements are essentially unchanged.
3. Unclaimed money
The ATO has to give a trustee a notice if it is satisfied that a 'former temporary resident' has a superannuation interest in the fund. A 'former temporary resident' is a temporary resident whose temporary visa has expired, he or she has left Australia, and at least six months have elapsed since the later of those events. The notice requires payment in respect of the former temporary resident's benefit to the ATO as 'unclaimed money'. On payment to the ATO within the prescribed time, the trustee has no further liability to the member, and any insurance cover ceases.
The member can apply, in the approved form, to the ATO for payment to them of the amount paid to the ATO. Interest is only payable in limited circumstances.
Former temporary residents should therefore request cashing of their benefits as soon as they are able rather than having to apply for payment later from the ATO.
4. Who is a former temporary resident?
A former temporary resident is defined as a person:
. Who under the Migration Act 1958 was the holder of a temporary visa (except any visa prescribed in the Regulations), and
, Who left Australia after starting to be a holder of the visa, and
, At least 6 months have passed since the later of the following events (or either of them occurred at the same time):
- the visa ceased to be in effect
- the person left Australia, and
, The person:
- is not the holder of a temporary or permanent visa, and
- neither an Australian nor a New Zealand citizen, and
. Has not made a valid application for a permanent visa that has not been finally determined under the Migration Act 1958.
5. Conditions of release
From 1 April 2009, only the following conditions of release will apply to the benefits of temporary and former temporary residents:
, The request for benefits to be cashed (see 2. above)
, Terminal medical condition
, Permanent incapacity
, Temporary incapacity
, The trustee is given a release authority to pay excess contributions tax, and
, The requirement to pay the benefit to the ATO as 'unclaimed money' (see 3. above).
The other conditions of release; for example, relating to employment or the payment of an income stream on attaining the preservation age, are only available to temporary or former temporary residents if they satisfied such a condition before 1 April 2009.
These changes mean that from 1 April 2009 a trustee will need to know whether a member making a withdrawal request is or has ever been a temporary resident.
6. Taxation -
A DASP is not assessable income and is not exempt income. However, recipients are liable to pay income tax on the payment at the rates outlined in the table below. The appropriate tax must be withheld by the fund trustee or the ATO when making the payment.
There are different procedures for requesting DASPs above and below $5,000. For guidance on how to request a DASP, go to the ATO's information page, Superannuation - information for temporary residents departing Australia at www.ato.gov.au
DASPs - tax treatment
|Tax component||Rate of tax|
|Taxable taxed element||38%|
|Taxable - untaxed element||47%|
Note: These tax rates are in addition to any tax payable on contributions or earnings within the client's fund.
Severe financial hardship
A person's severe financial hardship status is assessed by the fund trustee or RSA provider.
Based on written evidence provided by a Commonwealth department or agency:
1 This requirement is a subjective test assessed by the fund trustee. APRA has issued guidelines to all trustees on what may be considered to be 'reasonable and immediate family living expenses'.
Persons who have reached their preservation age and have been receiving income support for more than 39 weeks (eg receiving income support for 39 weeks after reaching age 55) can use either Test 1 or Test 2.
Examples of Commonwealth income support payments include: Newstart Allowance, Partner's Allowance and the Disability Support Pension. It excludes the Youth Allowance (for recipients who are undertaking full-time study) and Austudy payments.
Cashing restrictions for severe financial hardship
If a person meets the tests for severe financial hardship, the amount they can access from super is restricted as follows:
- For a person qualifying under test 1, the amount released from super in each 12 month period must be a single lump sum not less than $1,000 and not more than $10,000, and
- For a person qualifying under test 2, there are no cashing restrictions.
The Department of Human Services (DHS) has discretion to allow payment of preserved benefits in certain cases. Examples include:
- Payment on a loan is required to prevent foreclosure of a mortgage on a principal residence.
- To cover expenses in relation to a dependant's death, funeral or burial.
- To pay for medical treatment, medical transport, or medical related modifications to the person's principal home or vehicle for the member or a dependant.
Although the DHS must be satisfied that an application meets the criteria for early release of super, the final decision to pay out the benefit must be made by the trustee of the super fund.
Cashing restrictions under compassionate grounds.
The amount released from super for someone meeting the compassionate grounds condition of release must be:
- A single lump sum, not exceeding an amount that is reasonably required, and
- in the case of preventing foreclosure on a mortgage on a principal home, the amount released in each 12 month period must not exceed three month's repayments plus 12 month's interest.
As a first step it is wise to contact the relevant super fund to make sure it will allow the early release of super on compassionate grounds. If the member's circumstances meet those outlined for the early release of super benefits on 'specified compassionate grounds', it will be necessary to complete a DHS application form. The form can be downloaded from the Department of Human Services website at www.humanservices.gov.au or by contacting the DHS Early Release of Super Benefits Branch on 1300 13 10 60.
Termination of gainful employment (preserved amounts)
Preserved amounts must be taken as a non-commutable life pension or non-commutable life annuity where a member has terminated gainful employment with an employer who had, or any of whose associates had, at any time, contributed to the regulated super fund in relation to the member.
There are no cashing restrictions for restricted non-preserved benefits under this condition of release (refer to section 12.3).
A superannuation fund may pay a benefit to a member suffering temporary incapacity. This condition of release is commonly applied to Salary Continuance Insurance (SCI) held within superannuation. Only benefits that are not minimum benefits (ie an insured SCI payment) can be released under this condition of release. Temporary incapacity is where the member:
- Has ceased to be gainfully employed, or
- Has temporarily ceased to receive income under a continuing gainful employment arrangement, and
- Is suffering physical or mental ill health that caused the member to cease to be gainfully employed, and
- Is not permanently incapacitated.
Consequently, the temporary incapacity condition of release does not generally apply to a member's accrued benefits but instead is the mechanism which allows fund trustees to release salary continuance payments to eligible members.
Cashing restrictions for temporary incapacity
The amount of super released under temporary incapacity must be taken as an income stream (with specific restrictions) cashed from the regulated super fund for:
- The purpose of continuing (in whole or part) the gain or reward which the member was receiving before the temporary incapacity, and
- A period not exceeding the period of incapacity from employment of the kind engaged in immediately before the temporary incapacity.
For policies taken out prior to 1 July 2014, this condition of release may not be satisfied even though the member is successful in claiming on their SCI policy (for example, if the member was on unpaid leave or unemployed immediately prior to temporary incapacity). This could result in the insurance proceeds being trapped in the superannuation fund and unable to be paid directly to the member. This issue should not arise in respect of new policies taken out on or after 1 July 2014, however, as new policies within super are only allowed to the extent that they align with the death, terminal illness, permanent incapacity or temporary incapacity condition of release.
Income stream restrictions under temporary incapacity
For the purposes of accessing super under temporary incapacity, the income stream must meet all of the following requirements:
- Cannot be commuted.
- Is paid at least monthly.
- Does not have a residual capital value.
- The total amount paid each month is fixed or varies during any period of 12 months by no more than 5% per annum, or the consumer price index (CPI).
Last modified: Tuesday, May 2, 2017