Legal Information Sheet - Early Release of Superannuation

While superannuation is intended to be accessed only in retirement, you can secure early release of your superannuation (before retirement age) in certain circumstances.

Firstly, you can apply to your super fund for early release of super if you are suffering 'sever financial hardship' (as defined in legislation) if you satisfy one of the following two scenarios:

  • you have received Commonwealth income support (Centrelink) for a continuous 26 weeks, and you cannot meet your reasonable and immediate family expenses. In this case, you can access up to $10,000 in each 12-month period, and you must take a minimum of $1,000. If your balance is less than $1,000, then you must withdraw all of your super balance. 
  • you have reached your preservation age (age 55 for those born before July 1960, and at least age 56 for those born on or after 1 July 1960) and received Commonwealth income support for a cumulative 39 weeks after reaching your preservation age. In this case, you can access your full super benefit.

Please note: even if you satisfy the conditions for early access to super benefits due to ‘severe financial hardship’ you may belong to a super fund that doesn’t permit access on these grounds.

Secondly, if you are unable to meet the conditions required for ‘severe financial hardship’, you may be able to access your super early under ‘compassionate grounds’, through the Department of Human Services. The 'compassionate grounds' are as follows:

  • for mortgage assistance if your home is going to be forcibly sold by the bank or financial organisation that lent you the money for your home mortgage, or the bank is going to foreclose on your mortgage, and you need your super benefits to prevent this from happening. In this case, you can access an amount not exceeding, in each 12-month period, the sum of 3 months’ repayment, AND 12 months’ interest on the outstanding balance of the loan.
  • for medical treatment (medical costs for you or your dependant, or medical transport costs related to transporting you or your dependant [by land, water or air] to or from medical treatment). To access super for this purpose, two medical practitioners (including one a specialist in the area of illness), must certify that the treatment is necessary to treat a life-threatening illness or injury; and/or alleviate acute or chronic physical pain; and/or alleviate an acute or chronic mental condition. The treatment must not be readily available through the public health system, and must not be covered by private health insurance or by workers’ compensation.
  • for modifications to a home and/or vehicle where you or a dependant suffers a severe disability. To access super for this purpose, the home must be your principal place of residence, or you must own or have joint ownership of your vehicle. If you live in a rental property a release can still be approved if your landlord has provided consent to the proposed modifications.
  • for funeral or burial or other expenses related to the death of a dependant (who was financially, domestically or personally reliant on you). To access super for this purpose, super must be reasonably needed to cover a dependant’s death, funeral or burial expenses, including expenses from the funeral service provider and monument or headstone provider, but not from venue hire and catering.
  • for palliative care for a terminal condition (that is, in the case of impending death) suffered by you or one of your dependants. In this case, however, it may be quicker to apply for release of super directly via your superannuation fund. This type of early release isn’t taxed.

For further information about any of these matters, please contact Springdale Legal.

Legal Information Sheet - Rights of the ATO and tax tidbits

Rights of the ATO

The Taxation Office has an unrestricted right of access to all buildings, places, books, documents and papers. This means that the Tax Office can examine records in any building. The Tax Office does not need a search warrant.

In exceptional cases, they can carry out a surprise raid. They can gain entry by force, if necessary. They can open safe- deposit boxes by force, at a bank or elsewhere, if necessary. They are entitled to photocopy all documents which they find but they cannot take the documents away with them.

They are even entitled to make reasonable use of the tax-payer's work-space, photocopier, phone, light, power and other facilities. They can demand information as to where documents are located.

However, the Taxation Office has said that it will give advance warning when six or more tax auditors are due to descend on a business. It will also delay any searches to allow legal advice to be obtained and for any claim of legal professional privilege to be claimed.

Tax Debts

Under the Taxation Administration Act, the ATO has the legal right to sue to recover a due tax liability, whether this be incurred through unpaid income tax, GST remittance, unpaid superannuation, or otherwise.

A General Interest charge (GIC) is charged by the ATO on these outstanding amounts, if you were aware, or should have been aware, that they were outstanding. The rate of GIC varies, but at 2016 is relatively high at around 9% pa.

Superannuation and Super Debts

Additional penalties can apply, for example, if you do not provide required superannuation guarantee payments to your employers on time. In that case, you will be liable for a Super Guarantee Charge (SGC), which includes:

  • SG shortfall amounts calculated on your employee’s salary or wages
  • interest on those amounts (currently 10%)
  • an administration fee ($20 per employee, per quarter).

There are further penalties for false or misleading information which results in an underpayment of Super Guarantee, for example, a penalty can be imposed of up to 75% of the amount outstanding. 

Tax Tidbits - Simple Deductions

Tax law is a complex area, however there are a few quick tips which can improve your deductions come tax-time:

If you own a rental property, you can generally claim between 2.5% and 4% per year of the construction cost.

If you use your own vehicle for work, including from driving from one job to another, you can claim these expenses as a deduction. There are 4 methods for doing so: Cents per Kilometre method, 12% of Original Value method, One-third of Actual Expenses method and the Logbook method. Often, the first of these is most generous, and allows a deduction of 75c per km for a car over 2.6l engine capacity.

There are two methods of calculating depreciation on an asset, namely Depreciating Value and Prime Cost. While both end up deducting the same amount, depreciating value gives more deductions in the first years.

Offsets reduce your tax payable by the entire amount (not just a deduction). Some can give you a refund; other cannot. Offsets include: spouse, child housekeeper, housekeeper, invalid relative, caring for parents/parents in law, low income, trust beneficiary, for students, high medical expenses, unused leave, senior Australians, pensioners, mature age workers, overseas or remote workers, private health insurance holders, entrepreneus, investors in affordable properties or who contribute to spouses’ super, as well as others.

For further information about any of these matters, please contact Springdale Legal.