On top of all the responsibilities you juggle as a business owner, does managing your employees’ superannuation, in particular, leave you scratching your head?
For example, how would you answer an employee when they ask about how to apply for superannuation early?
We’ve tailored this guide for small to medium-sized Australian business owners like you.
We’ll explain who qualifies for an early release of superannuation, the necessary steps to apply, and additional considerations.
Armed with this knowledge, you’ll be well-equipped to guide your employees through the complexities of early superannuation, strengthening your leadership and their trust in you.
What Is Superannuation?
Superannuation is an essential aspect of employment and retirement in Australia.
As a business owner, you must contribute a percentage of each employee’s salary (11% as of July 1, 2023) into their super fund.
This money isn’t just sitting idle; the super fund invests these contributions, allowing them to grow over time.
It’s like planting a seed for each of your employees that will eventually blossom into comfortable retirement savings for them.
But sometimes, your employees may need to access these savings earlier than retirement age.
How Do Employees Access Superannuation Early?
Let’s walk through the ins and outs of how your employees can apply for early release of superannuation if they qualify for it.
What Reasons Can Be Given for Applying for Early Access?
An individual might apply for early access to superannuation for the following reasons:
- Severe financial hardship
- Terminal medical condition
- Compassionate grounds
- Temporary or permanent incapacity
- Departing Australia Superannuation Payment (DASP)
- Balances less than $200
- A temporary resident leaving Australia
What Conditions Do You Need To Meet if You Are Below Preservation Age?
If your employee asks this question, you can advise them that applying for early release of superannuation on the grounds of severe financial hardship is an option regardless of whether they’re below or above the preservation age.
If your employee is below their preservation age (between 55 and 60, depending on their date of birth), plus 39 weeks, they can apply for early access to superannuation if they meet these conditions:
- They’re facing severe financial hardship and have received eligible government support for 26 continuous weeks.
- They’re unable to cover immediate and necessary living expenses for their family.
If the balance in their super fund is below $1,000, they can withdraw the remainder post-tax.
A withdrawal can only be made once in any 12 months.
What Conditions Do You Need To Meet if You Are Above Preservation Age?
If your employee is above their preservation age (between 55 and 60, depending on their birth date), they can apply for early access to superannuation if they meet these conditions:
- They’ve been a recipient of qualifying government income support payments for a total period of 39 weeks.
- At the time of their application, they’re not gainfully employed (engaged in work for reward or profit, either part-time or full-time).
For this process, there are no limitations on the withdrawal of cash.
Where Can You Apply for Superannuation Early Release?
For employees asking this question, you can tell them that they can typically apply for early superannuation release directly through their super fund provider.
The provider can also advise whether the circumstances warrant an application through the Australian Taxation Office (ATO) instead.
Such applications can be submitted through the employee’s ATO account via the myGov website.
Early Superannuation Withdrawal Resources
The ATO’s Superannuation Guide is the best source of accurate and up-to-date information to share with employees wondering how to apply for superannuation withdrawal.
But what if your employees have questions about other early-release superannuation qualifications?
Accessing Superannuation Due to a Terminal Condition
If your employee has been diagnosed with a terminal medical condition, they may qualify for early access to their superannuation.
According to the ATO, the key qualifications are that two registered medical practitioners (one must be a specialist in the area related to the illness or injury) certify that they have a condition likely to result in death within 24 months.
They must contact their super fund directly and follow the necessary procedure.
In these circumstances, your employee can access their entire super balance tax-free if they meet these criteria:
- Their super is within a complying super provider or an annuity provider.
- They have a terminal medical condition at the time of the payment or within 90 days of receiving it.
For more information, see the ATO’s official website under “Access due to a terminal medical condition”.
Early Access to Superannuation on Compassionate Grounds
Early access to superannuation on compassionate grounds is possible when an employee needs money to pay for certain costs they absolutely cannot meet for themself or their dependents.
Such costs include
- Medical treatment and medical transport.
- Modifying their home or vehicle for special needs due to a severe disability.
- Palliative care.
- Making a payment on a home loan to prevent their home from being sold.
- Funeral or burial expenses.
Your employee must go through the ATO to apply.
They can start by creating or logging into their myGov account linked to the ATO.
Once logged in, they can complete the application and provide all the necessary documents.
The ATO will review the application and notify your employee of the outcome.
If approved, they must contact their super fund to access the money.
For more information, see the ATO’s official website under “Early access on compassionate grounds”.
What Is Considered Illegal Early Access to Superannuation?
Illegal early access to superannuation involves accessing super before a person is legally entitled; for example
- By means of a “super scam”. Promoters of illegal early access schemes offer to help people access their super early by transferring it into a self-managed super fund, then releasing the funds for a hefty fee.
- Applying for early release on untrue or misleading grounds, such as falsifying documents or misrepresenting personal circumstances.
A person can only legally access their super early under specific circumstances outlined by the ATO or their super fund provider.
Any other method could land them in hot water with the ATO, leading to heavy penalties.
For more information, see the ATO’s official website under “Illegal early access to super”.
Do You Need Help With Superannuation Accounting and Financial Services?
Do you have employees asking questions about how to apply for superannuation early?
They could qualify for early release superannuation if they meet specific qualifications, such as facing financial hardships, a terminal illness diagnosis, or on compassionate grounds.
Their first point of contact should be their super fund provider for advice on whether their circumstances warrant an application through the fund or via the ATO.
Superannuation is an essential part of your business. But it can be a complex terrain to navigate.
From understanding if and how your employees can access their super early to making sure you pay their super accurately and on time, there’s a lot to remember.
Not to mention staying compliant with the guidelines set out by the ATO!
Professional help makes all the difference.
At GeekBooks, we offer specialised superannuation accounting and financial services to make your life easier.
Take the first step towards a seamless superannuation experience by completing our online booking form or calling 02 9158 3591.