A lot of people take an “out of sight, out of mind” mentality towards their superannuation – aside from tax time when their fund sends out its annual email, most people don’t really think of super until it’s retirement time.
A lot of people don’t know how much is in their super, or how much annual return it’s delivering, or where their money is being invested.
This simply won’t do.
Super is something that everyone should understand. And that begins by understanding how it works.
To help with that, we’re going to start with one of the more fundamental questions (and one that’s being asked a lot given the circumstances): how old do you have to be to make a superannuation withdrawal?
“When can I access my superannuation?”
When you boil it down, your superannuation is a retirement fund – as such, it makes sense that it’s only accessible once you get close to retirement age.
For most people, the Australian superannuation withdrawal age is 65 years old – regardless of whether or not you’re still working or are retired, all Aussie’s super opens up at this age.
Of course, as with many of the topics our personal accountants cover, there’s more to it than just that!
Preservation age, explained
Like we mentioned above, for most of us, our super automatically opens up when we turn 65, regardless of whether or not you continue to work.
But what happens if you retire early?
If you’ve retired before you turn 65, then you probably have a good thing going on. Even then however, you might still need to occasionally dip into your super in order to supplement your income and support yourself.
That’s where preservation age comes into the picture.
This is the age where it becomes possible to access the money and assets tied up in your superannuation if you’ve retired early.
Unfortunately however, there isn’t a single consistent preservation age to refer to – in short, there’s no simple, straightforward answer.
Depending on when you were born, you might have a different minimum age:
- Before 1 July 1960: 55
- 1 July 1960 – 30 June 1961: 56
- 1 July 1961 – 30 June 1962: 57
- 1 July 1962 – 30 June 1963: 58
- 1 July 1963 – 30 June 1964: 59
- From 1 July 1964: 60
Of course, reaching preservation age is just one of the conditions you’ll need to meet if you want to access your super – you’ll also need to fulfil a number of other conditions.
“What if I’m not fully retired?”
Say you’ve dropped down to part-time hours, or have stepped back and taken a more hands-off role. In practice, you’re already partially retired.
If you’re aged between 55 and 60, you may be able to set up a transition to retirement (TTR) plan that lets you – you guessed it – access part of your super early, without having to fully give up work.
The idea is that you’ll be able to use your super to supplement your income. Not to mention, TTR pension payments are tax-free, which can help improve your tax situation.
Just remember that by accessing your super now, you could potentially reduce the amount of money you have access to when you retire for real. As with any major financial decision, it’s one you should make only after consulting with a personal accountant.
Superannuation withdrawal tax
“Will I have to pay a superannuation withdrawal tax?”
It’s one of the most common questions when it comes to pulling money out of your superannuation fund – and like many other accounting and superannuation questions, the answer is “it depends!”
How much your super will be taxed (if at all) depends on whether:
- You’re at preservation age
- It’s an income stream or in a lump payment
- The money in your super is tax-free or taxable
All of these and more determine whether your withdrawal is taxed, what the rate is and whether or not you get an offset to reduce tax paid.
There’s a lot to consider – once again however, a personal accountant in Melbourne can be a huge help in determining your tax obligations here!
Other ways to access your superannuation early
For most people, your options boil down to:
- Waiting until you turn 65
- Waiting until you reach preservation age
Of course, there are some exceptions that may allow you to access your super even earlier.
Australian superannuation laws have built-in clauses that allow you to access the money in your super in some extenuating circumstances, regardless of your age.
What kinds of circumstances are we talking about?
COVID-19 financial problems
It’s been in headlines for months on end now, but in case you’ve missed it, COVID-19 is making life difficult for many across the land.
In order to help ease the financial burden, the ATO has set up a scheme allowing people who have been made unemployed or redundant by COVID-19 to access the money in their superannuation fund earlier.
Under this scheme, eligible Australian and New Zealand citizens and permanent residents can withdraw up to $10,000 tax-free from their super early in order to deal with the pandemic’s financial consequences.
Since it’s targeted towards those hit hardest by COVID-19, this scheme is age agnostic – anyone with a super account can apply (and they have, with $33 billion withdrawn and counting).
Life has a habit of throwing curveballs at you – and oftentimes, these curveballs can leave a significant dent in your personal finances.
In many cases, you may be able to access your super before 65 or preservation age to deal with unexpected costs:
- Medical costs that isn’t covered by Medicare
- Home loan payments you can’t make otherwise
- Funeral costs
- Specialised disability care
Just remember that if your request is approved, it’ll be approved for the amount you need to meet these expenses, so don’t expect a huge payout!
Is a workplace injury threatening to put you out-of-action for weeks or even months?
In order to help you support yourself, you may be able to withdraw from your superannuation, receiving money from your super fund in regular payments until you’re able to return to full-time work.
If you have a terminal condition, you may be able to access your superannuation early, so long as you get 2 medical practitioners (including one specialist) to certify that your condition is likely to be terminal within 24 months.
In order to make such a claim, you’ll need to get in touch directly with your super provider. If your claim is accepted, you’ll receive a lump sum payment directly from your super fund, free of charge (if you withdraw it within 24 months).
“How can I withdraw my superannuation early?”
Our personal accountants can answer all of your super questions
Superannuation is a complex area, one that many people have a lot of questions about.
It’s also one that can have a huge impact on your future finances – as such, it’s crucial that you make the right call when it comes to your superannuation.
Withdrawing your superannuation isn’t always the right decision. While it could make things easier in the short-run, it could also hobble you in the future – which makes the decision whether to do so a difficult one.
Luckily, our personal accountants are here to ensure that you make the right call.
Our personal accountants have one goal: to get you where you want to be. And since 1966, we’ve been doing just that.
If you have superannuation questions, our team is exactly who you need to talk to.