Early Access to Super for home loan repayments

In this increasing interest rate environment, if you or someone you know are seriously struggling to meet their home loan repayments, money inside superannuation may be able to be released to meet the home loan repayments. But, like everything, it is important to read the fine print.

The Australian Tax Office allows superannuation trustees to release superannuation on compassionate grounds so that they can pay home loan repayments and prevent foreclosure and loss of their home.

Accessing your super early will affect your super balance and may affect your:

• Taxation on withdrawal

• Capital Gains tax inside superannuation

• Future retirement income

• Income and life insurance protection

Taxation impact

If you are under 60 years old, your lump sum withdrawal from super will be taxed at a rate between 17% and 22% on taxable components.

CGT inside super

Selling assets inside of superannuation to pay for the release of the funds may incur Capital Gains Tax on your accumulated gains. You will need to account for this when you select the amount you sell down. Alternatively your superannuation fund may account for it for you.

Future retirement income

Obviously if you reduce your superannuation amount, then it will not be there growing to provide for your retirement. If you still have a while to go, then you will have time to put the money back in that you took and possibly more. If you are close to retirement, early access is likely to have a bigger impact on your retirement lifestyle.

Insurance

Many people have insurance inside their superannuation account ready to support them and loved ones should they not be able to work due to illness, injury or death. Taking money outside of super may reduce the remaining balance below the minimum thresholds for the insurance. Check with the superannuation fund to find out more about the conditions of retaining the insurance.

To access the money, there are a few steps required:

1. Apply to the ATO for compassionate release of superannuation money. You can do this via your My Gov app. Supporting documentation will need to be provided. The ATO says this takes about 14 days if all paperwork is provided. Longer if not.

2. Request your superannuation fund release funds based on the documentation provided by the ATO. Call them and talk to them about their process and find the relevant forms on their website. This is likely to take around 14 days as wel

If you would like to run the numbers on the various scenarios you are facing, please contact us.