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Severe financial hardship

Section: 12.10

A person's severe financial hardship status is assessed by the fund trustee or RSA provider. There are two tests, either of which can be met to qualify under severe financial hardship. Persons who have reached their preservation age plus 39 weeks and have been receiving income support for more than 39 weeks can use either Test 1 or Test 2.

Test 1

Based on written evidence provided by a Commonwealth department or agency:

  • the person has received Commonwealth income support payments for a continuous period of at least 26 weeks
  • the person was in receipt of those payments at the time of application, and
  • the person is unable to meet reasonable and immediate family living expenses.

Test 2

The person has reached preservation age plus 39 weeks and:

  • Based on written evidence provided by a Commonwealth department or agency, the person has received Commonwealth income support payments for a cumulative period of 39 weeks after the person has reached their preservation age.
  • is not gainfully employed on either a part-time or a full-time basis on the date of the application.
Note: Examples of Commonwealth income support payments include Newstart Allowance and Disability Support Pension. It excludes 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.

Severe financial hardship condition of release frequently asked questions

Question 1: My client (age 50) has been in receipt of Newstart Allowance for the past 26 continuous weeks. However, she has ample cash reserves and is not struggling to meet her daily living expenses. Can she access some of her superannuation benefits under the severe financial hardship condition of release?

Answer: No. For a client aged under preservation age plus 39 weeks, one of the requirements in satisfying the severe financial hardship condition of release is that a member must be unable to meet reasonable and immediate family and living expenses.

While this condition of release allows payments of up to $10,000 per 12-month period, benefits would likely only be released by a fund to the extent that they are required to meet reasonable and immediate family or living expenses. Your client would therefore be unlikely to qualify for a release of benefits under the severe financial hardship condition of release.

Question 2: My client (age 57) has been in receipt of Newstart Allowance for the past year. However, she has ample cash reserves and is not struggling to meet her daily living expenses. Can she access some of her superannuation benefits under the severe financial hardship condition of release?

Answer: Yes. For clients who are at least preservation age plus 39 weeks, the severe financial hardship condition of release is simply met by the client receiving an eligible Commonwealth income support payment for a total of 39 weeks since reaching preservation age, as well as not being employed for 10 or more hours per week when applying to access benefits. Unlike for younger clients, there is no requirement in this situation to be unable to meet certain family or living expenses. Where a client who has reached preservation age plus 39 weeks satisfies the severe financial hardship condition of release, all benefits become unrestricted non-preserved.

Last modified: Wednesday, July 24, 2019