Severe Financial Hardship Release Condition

Super fund members affected by the Victorian Bushfires or the North Queensland floods may be able to access part of their super via the Severe Financial Hardship release condition. 

The maximum amount which can be accessed is $10,000 and the benefit must be paid as a single lump sum.

While the Trustee of the super fund decides whether the member is eligible to access their super under this release condition, the following points should be noted:

• the benefit will still be taxed
• the benefit can only be paid as a lump sum
• this access condition can only be used once in each 12-month period
• if the member is under their preservation age – the taxable amount of the benefit will be taxed as assessible income – but the rate of tax will be capped at 20%
• if the member has attained their preservation age – the taxable amount of the benefit will be at 0% (for that part of the benefit within the low rate cap amount ) and taxed at a rate capped at 15% for the balance
• the eligibility conditions which the member must first satisfy are quite stringent – generally
  • the member must have received Commonwealth income support payments for a continuous period of at least 26 weeks,
  • the member must provide written evidence from the Commonwealth department or agency responsible for the income support payment as to the fact that the member has satisfied the 26 week requirement;
  • the member must have been receiving the income support at the time they make the application to the trustee for the benefit; and
  • the trustee must be satisfied that the member cannot meet reasonable and immediate family living expenses.

(If the member has attained their preservation age and 39 weeks, a less stringent eligibility test applies).

• because of the proportioning rule, the member cannot select that the benefit be paid out from their tax free component.