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Australian Lawyers and Consultants

Early Exits From Super Funds

December 2001

Early in 2002, the government plans to implement new legislation to permit early access of superannuation benefits in some circumstances. Some of the aspects include:

1. Senate Committee Report

   A Select Senate Committee is to report by 31 January 2002 on the effectiveness of the current rules which severely curtail early exits from superannuation funds on the grounds of “compassionate and severe financial hardship”. Currently, early access to benefits relies on a person receiving Commonwealth income support payments (nonetheless, these still exclude a range of government payments) for 26 weeks and the inability to meet reasonable immediate living expenses. Alternatively, a person may be granted early access to their benefits in order to cover:

   1. medical expenses for acute or life threatening illnesses or injuries;
   2. expenses to meet the needs of disabled persons or their dependants; or
   3. to provide palliative care of persons or their dependants.

   Tragically, the imminent loss of one’s home in a mortgagee default situation does not seem to faze the superannuation regulator whose compassion will not extend to permit early release of superannuation benefits.

2. Non-residents permanently leaving Australia

   Imminent changes may finally make it easier for a non-resident permanently leaving Australia permanently to have access to their superannuation benefits, by imposing a new withholding tax system on released benefits.

3. Early Retirement and RBLs

   Just a reminder for people contemplating retirement before the age of 55 years, that a reduction of Reasonable Benefit Limits (RBLs) by 2.5% per annum applies for each whole year in the period between the birthday prior to the payment of the retirement benefit and the date when the person would turn 55.

4. Approved Early Retirement Schemes

   Where, as part of a rationalisation or reorganisation of an employer’s business, there are likely to be mass redundancies, it is possible to seek ATO approval (apply for a special Class Ruling) for an “Approved Early Retirement Scheme”. The advantage for the employees is the generous tax treatment for benefits paid.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

Return to the Superannuation Law Archive.