How Accessing Your Super Early Can Have Unintended Consequences

How Accessing Your Super Early Can Have Unintended Consequences

With Australia’s superannuation system based on the basic principle of putting money aside until retirement, it’s common knowledge that there are very few circumstances under which people are able to access funds early.

However, for those who do successfully apply for some or all of their superannuation to be released, it’s important that people understand the potential implications of that decision.

The Australian Taxation Office outlines the limited circumstances in which superannuation can be accessed early, including severe financial hardship, a terminal medical condition or for compassionate reasons, such as for weight-loss surgery, psychiatric treatment, dental procedures or IVF, for example.

Figures from the ATO show there were over 56,000 applications to access superannuation on compassionate grounds in the 21-22 financial year.

More than 34,000 applications were approved, pulling $573 million out of the super system.
While the overall trend over the past four years is an increase in the number of applications to access superannuation on compassionate grounds, it’s important to highlight that applicants must meet specific criteria.

One of these criteria is that the medical treatment is either for you or a dependent, for a life-threatening illness or injury, or to alleviate acute or chronic pain, or to alleviate acute or chronic mental illness.

However, it’s important to note that documentation must be provided, including two medical reports from registered specialists proving the criteria is met.

Home or vehicle modifications to accommodate special needs arising from you or your dependant’s severe disability can also qualify.

It’s from here that I would urge superannuants to consider the longer-term implications of accessing their super balances early.

While evidence of medical conditions or injury are required, it’s important to consider the potential impact on any insurance policies held, such as life insurance.

Are the conditions specified covered by your policy? Have they been previously disclosed to your insurance company, do they need to be, and will your current premium be impacted? Will such conditions impact your ability to be covered by insurance in the future?

People also need to consider that any monies paid out will be treated as income for that financial year, which will increase the total amount of income earned, potentially pushing some people into a higher tax bracket and/or resulting in tax owing.

And while it might be obvious, it goes without saying that a simple consequence of withdrawing super early is potentially having a smaller balance at retirement.

Your balance doesn’t only decrease by the amount withdrawn initially, but by any potential income or gains that sum could have earned over the remaining years until your retirement.

The ATO rightly warns people against illegal schemes to access your super early.

However, I believe people also need to be educated about the unintended, but still important, consequences of withdrawing funds before retirement.

While the reasons for seeking to withdraw funds from super shouldn’t be understated, people need to be fully informed of all potential consequences, however unintended they may be, and continue to treat early access to super as a last resort.

Naz Randeria is the Managing Director of Reliance Auditing Services.

About Reliance Auditing Services

Founded by Managing Director Naz Randeria over a decade ago, Reliance Auditing Services is an independent auditing services firm, specialising in audit of self-managed superannuation funds and also providing external audit and assurance services to clients across Australia. The team offers more than 25 years’ experience across a very diverse range of businesses and organisations.


Reliance Auditing Services is a specialist independent auditing services firm providing quality audits to SMSFs, companies, not-for-profits and AFS licensees all over Australia. Reliance Auditing places a huge emphasis on educating our clients to ensure they fulfil their reporting obligations.

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DISCLAIMER: This information is an interpretation of rules, regulations and standards. It should not be considered as general or specific advice and neither purports, nor is intended to be advice on any particular matter. No responsibility can be accepted for those who act on the contents of this publication without first obtaining specific advice. Liability limited by a scheme approved under Professional Standards Legislation.