Gaining early access to superannuation

179. Another relevant issue in this Inquiry is whether victims of family violence should be able to gain early access to their superannuation more easily—in order, for example, to give financial assistance to leave an abusive relationship or soon after leaving such a relationship.

180. Generally, superannuation funds cannot be accessed before the member is the required ‘preservation age’, which currently ranges from 55 to 60 years depending on date of birth. Section 79B of the Superannuation Act provides limited grounds for the early release of benefits, either on the basis of severe financial hardship or compassionate grounds. These grounds are defined in the Superannuation Industry (Supervision) Regulations.[131]

181. The grounds contained in the regulations are quite narrow. This position reflects the balance sought by superannuation policy between preserving a person’s superannuation funds in their entirety until retirement and recognising that there may be some circumstances where providing limited early access will assist the person in overcoming a severe financial hardship or obtaining some compassionate relief.

182. It has also been recognised that the availability of early access to superannuation benefits needs to be considered in the broader context of the adequacy of current social security measures, as access to superannuation savings should not be seen as a first port of call for those experiencing financial difficulties.[132]

Severe financial hardship

183. To satisfy the ground of ‘severe financial hardship’ under reg 6.01(5), applicants (if under the preservation age) must prove:

  • they have been receiving ‘Commonwealth income support payments’[133] continuously for the past 26 weeks; and

  • they are unable to meet reasonable and immediate family living expenses.

184. The trustees of a superannuation fund are responsible for determining the release of benefits under this ground, although the Australian Prudential Regulation Authority (APRA) does provide guidance for trustees when applying the second part of the test. If both tests are satisfied, the trustee may release a lump sum of between $1,000 and $10,000.[134] A slightly different test applies to persons who have attained the preservation age;[135] and there is no restriction on the amount that can be released.[136]

185. The inflexibility of the 26-week test has been criticised generally—and in relation to victims of family violence specifically. A general concern is that it may be difficult to demonstrate continuous receipt of government payments for 26 weeks, as such payments may be stopped or suspended for a range of reasons. Victims of family violence, who were not previously eligible for social security payments due to income or assets tests, may only be eligible to receive them once they are no longer considered to be a ‘member of a couple’ and their income and assets are no longer pooled. Accordingly, victims may have to wait at least 26 weeks to become eligible for early access to superannuation.[137] This may be the period when they are suffering the most severe financial hardship.

186. In 2002, the Senate Select Committee on Superannuation and Financial Services recommended that the Australian Government consider extending the criteria that govern early access to superannuation. It expressed its opinion that there was merit in the suggestion of increasing the flexibility of the current 26 weeks’ receipt of income support payments to include 26 out of a possible 40 weeks.[138] However, the Committee went on to state that, ‘while early access under certain circumstances should be permitted, it should not be made too easy because of the danger of eroding retirement incomes’.[139] This could also have particular impact in reducing women’s retirement incomes, which are already significantly lower than those of men.

Question 30 Should the Superannuation Industry (Supervision) Regulations 1994 (Cth) be amended to require that an applicant, as part of satisfying the ground of ‘severe financial hardship’, has been receiving a Commonwealth income support payment for 26 out of a possible 40 weeks (or some other period)?

Compassionate grounds

187. The other main basis on which a person may be able to access some superannuation benefits early is ‘compassionate grounds’. A person may apply for the release of benefits where these are required for:

  • mortgage assistance to prevent the foreclosure or sale of the person’s principal place of residence;

  • costs associated with palliative care;

  • medical treatment costs or medical transport costs (in either case, of the person or a dependant);

  • costs associated with accommodating special needs relating to a severe disability (of the person or a dependant);

  • costs associated with a dependant’s palliative care, death, funeral, or burial; or

  • expenses in other cases where APRA has determined that the release is consistent with one of the foregoing grounds.[140]

188. These grounds focus on meeting a category of narrowly defined expenses, as compared to early release on the basis of ‘severe financial hardship’, which is concerned with reasonable and immediate family living expenses.

189. In order to obtain early release pursuant to ‘compassionate grounds’, a person must apply to APRA. APRA, which is responsible for determining whether release is required to meet one of these prescribed expenses, whether the person does not have the financial capacity to meet the expense,[141] and the amount of the single lump sum that is reasonably required.[142] However, the trustee of the superannuation fund has ultimate responsibility for approving the release of the benefits.[143]

Question 31 Should the Superannuation Industry (Supervision) Regulations 1994 (Cth) be amended to provide a specific ‘compassionate ground’ to enable the early release of superannuation benefits to a victim of family violence?

[131]Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.01; Superannuation Act 1976 (Cth) s 79A.

[132] Senate Select Committee on Superannuation and Financial Services—Parliament of Australia, Early Access to Superannuation Benefits (2002), vii. For example, the adequacy of Crisis Payment, which is discussed in Family Violence and Commonwealth Laws—Social Security.

[133]Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.01(2), definition of ‘Commonwealth income support payments’.

[134] Ibid sch 1, pt 1.

[135] Ibid reg 6.01(5)(b).

[136] Ibid sch 1, pt 1.

[137] Maurice Blackburn Cashman and Carlton Fitzroy Financial Counselling, Early Access to Superannuation: Submission to the Senate Select Committee on Superannuation and Financial Services (2001), [2.2.4].

[138] Senate Select Committee on Superannuation and Financial Services—Parliament of Australia, Early Access to Superannuation Benefits (2002), [4.36]–[4.40].

[139] Ibid, viii.

[140]Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.19A(1).

[141] Ibid reg 6.19A(2).

[142] Ibid sch 1, pt 2.

[143] CCH, Australian Superannuation Commentary (2010) [3-078] as at 8 February 2011.