The ATO has reminded superannuation funds there are limited circumstances under which they can allow members to have access to benefits due to financial hardship under the rules for compassionate release.
In an update posted on its website, the regulator stated: “We commonly receive calls from people experiencing severe financial hardship or wanting to access their superannuation to assist with general expenses.
“Unfortunately, these circumstances do not meet the grounds for compassionate release,” it said, noting superannuation funds, and not the ATO, were responsible for accepting and processing compassionate release requests.
It added that given superannuation funds are responsible for assessing requests to release benefits due to severe financial hardship, they had to be satisfied the member cannot meet “reasonable and immediate family living expenses”.
Additionally, super funds also had to check the fund member was receiving government income support payments continuously for 26 weeks and at the time they applied to the trustees as part of their claim for financial hardship.
The ATO said in the event a payment was to be made, it “must be a single gross lump sum of no more than $10,000 and no less than $1000 (or a lesser amount if the member’s benefits are less than $1000)”, and only one payment was permitted in any 12-month period.
It noted the conditions were different where a member had reached their preservation age plus 39 weeks.
“You [the fund] need to be satisfied that the member has been receiving relevant government income support payments for a cumulative period of 39 weeks since reaching their preservation age and was not gainfully employed on a full-time or part-time basis at the time of applying to the trustees,” it said.
Under these circumstances there were no cashing restrictions.
In guidance released in May to super fund members, the ATO noted severe financial hardship was not administered by the regulator.
Additionally, any sums withdrawn due to severe financial hardship were not subject to special tax rates and would be taxed as a super lump sum, and for people under 60 this was generally between 17 per cent and 22 per cent, but no tax applied for those over 60.
