Accessing Superannuation When Affected by the Bushfires

 Shartru – access to superannuation


With the devastating impacts, the Australian bushfires are wreaking on our physical environment thought must be given to those individuals and families who face the potential loss of regular income through employment or self-employment and those businesses which may face extended periods of closure, minimal trading and significant loss of cash flow. Such individuals and business owners may consult their financial advisors to query as to whether superannuation assets can be accessed in order to ameliorate some of the financial crises which may be experienced.

As we are all aware, access to superannuation is subject to the “preservation” rules. The “conditions of release” of benefits for regulated superannuation funds are to be found in Schedule 1 of the Superannuation Industry “Supervision” Regulations 1994 (Cth) and which refer to the specific conditions of release that must be met in order to access superannuation benefits and the cashing restrictions that may apply. In general, fund members in retail, industry or corporate funds will need to ensure that any declaration made to the trustee meets the condition of release that allows accessed in part or full to their benefits. However, there is a risk of illegal early access to superannuation benefits in self-managed superannuation funds where members (however well-intentioned) may not have met a condition of release that allows access to their benefits.

In the main, most benefits in regulated superannuation funds are noted as “preserved” but an advisor may come across funds in which there may be an unrestricted non-preserved component (which is immediately accessible) or, even more rarely, a restricted non-preserved component. The latter is often found as part of a legacy issue and an administration failure given that the restriction on the non-preserved benefits possibly should have been lifted upon the termination of gainful employment with an employer who had, at any time, contributed to the regulated superannuation fund in relation to the member. It is often useful to enquire and to establish whether the appropriate documentation could be furnished to the trustee of a regulated superannuation fund in order to allow the lifting of the restriction and thus access to the then unrestricted non-preserved benefits.

For those fund members who have already attained the age of 65, access to their superannuation benefits is not subject to restriction, notwithstanding that the fund member may continue to be gainfully employed.

In addition, the “retirement” condition of release can be met on or after the member’s preservation age. This may be difficult to achieve for those members who have yet to attain the age of 60 and who may not be able to make the declaration of “retirement”. The declaration of retirement requires a member to cease gainful employment and have no intention to become gainfully employed in the future. It is important to note that the concept of gainful employment in the superannuation context means undertaking paid work for at least 10 hours per week and it is, therefore, important to note that the retirement condition of release can be met if the member, say, reduces work commitments to less than the 10 hours per week threshold but continues to undertake paid work.

For those members who have attained the age of 60 but have not yet reached 65, the above conditions may be met but this condition of release may also be met in circumstances in which the member ceases work for an employer but continues to work for another employer. The mere cessation of an employment arrangement on or after the attainment of age 60, is sufficient to meet the retirement condition of release.

A limited condition of release which will allow partial access to superannuation benefits is available to those members who have attained their preservation age (and cannot meet the retirement condition of release) by triggering a transition to retirement income stream (“TRIS”). A maximum of 10% of the commencement balance in the first year of the establishment may be drawn from the TRIS and this percentage is not subject to prorating if the TRIS commences part way through the income year.

Under the current circumstances, an advisor may face queries from members as to whether they can access their superannuation benefits on compassionate grounds or due to severe hardship notwithstanding that they may not meet the standard conditions of release referred to above. Unfortunately, the qualification conditions to both of these conditions of release are difficult to meet – deliberately by design – notwithstanding that the financial need of the members may be significant.

In order to meet the severe financial hardship condition of release:

  1. the trustee of a regulated superannuation fund must be satisfied that the member:
    1. is or has been continuously on Commonwealth income support benefits for 26 weeks, and
    2. the member is unable to meet reasonable and immediate family living expenses


  1. the member has reached the member’s preservation age and 39 weeks and the trustee is satisfied that the member:
  • has been on Commonwealth income support for a cumulative period of 39 weeks since reaching preservation age; and
  • is not gainfully employed for at least 10 hours per week.

This condition of release is subject to limited cashing restrictions. If definition 1 applies, access is limited to a single lump sum amount of between $1,000 and $10,000 per annum but, if definition 2 applies, the member has access to the entire benefit.

The compassionate grounds condition of release generally involves medical expenses and related issues but can also include the making of payment on the loan or council rates to prevent the loss of the member’s principal place of residence where foreclosure may be in imminent. The ATO advises on its website that benefits may be released on specified compassionate grounds if all of the following conditions are met:

  • a member does not have the financial capacity to meet an expense; and
  • a release is allowable under the governing rules of the fund.

The amount of superannuation that can be paid on compassionate grounds is limited to what is reasonably needed and is paid as a lump sum.

For a member of an SMSF, it is the ATO (and not the trustee) which determines whether a trigger of release due to compassionate grounds is allowable and qualification is difficult.


Charitable donations

There has been some discussion as to whether a charitable donation can be made from a regulated superannuation fund. The significant consideration is whether such a charitable donation would meet the sole purpose contained in s 62 of the Superannuation Industry (Supervision) Act 1993 (Cth). The relevant Ruling (SMSFR 2008/2) emphasises that the application of the sole purpose test is to ensure that the SMSF is maintained solely for the purposes specified in subsection 62(1) and the making of a charitable donation is not the provision of a benefit considered by the Ruling.

Even if the capacity to make a charitable donation was allowed and a deduction able to be claimed by the superannuation fund, the tax benefit in making the deduction would be a maximum of 15%, whereas if the donation was made by an individual to a charity which is a Deductible Gift Recipient (“DGR”), the donation would be deductible at the individual’s marginal tax rate.