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Super is a long-term investment designed to support you in retirement. Because of this, there are strict rules on when you can access your super.

While you normally can’t access your super until you reach your preservation age and retire, you may be able to access some of your super earlier on compassionate grounds if you have applied for and received approval from the Australian Taxation Office (ATO).

This is where you have no means of paying for unpaid expenses such as:

  • medical treatment and medical transport for you or your dependant
  • making a payment on a home loan or council rates so you don’t lose your home
  • modifying your home or vehicle to accommodate you or your dependant’s severe disability
  • palliative care for you or your dependant
  • expenses associated with the death, funeral or burial of your dependant

More information is available on the ATO website.

 

What’s the process?

Before you come to Mercy Super to access part of your super early on compassionate grounds you first need to have applied for and received approval from the ATO.

  • The ATO is responsible for assessing and approving your eligibility to access your super, including the amount you can access.
  • Mercy Super is then responsible for making the payment once approved by the ATO.

You can initiate the application process online through the ATO online services section of your myGov account.

Understand any tax implications

Lump sum withdrawals from your Super Account are taxed as super lump sum payments.

If you are age 60 or over, then any withdrawals from your Income Account are tax free.

If you are under age 60, these payments are generally divided into tax-free and taxable components and are taxed according to your age as shown in the table below. The tax-free and taxable components are calculated using complex rules, but in general, the components depend on the source of the original contribution and the nature of the payment being made.

The tax on the taxable component of retirement lump sum payments is as follows:

You are… Your taxable component is… Your tax-free component is…
Less than preservation age Taxed at 20% (plus Medicare levy) Tax-free
Preservation age to age 59 The first $225,000 (2021/22)* is tax free. You pay tax at 15% on the balance (plus Medicare levy) Tax-free
Age 60 and over Tax-free Tax-free

*This cap is indexed, but only when indexation produces an increase of $5,000 or more.

Note:

  • The tax rates shown in the table above assume you have supplied your Tax File Number (TFN) and that there is no untaxed element of your benefit in the Fund
  • When withdrawing a lump sum from your Super Account, the amount withdrawn will need to be paid in proportion to your taxable and tax-free components
  • Different tax rates apply to payments made in relation to terminal Illness, death, total and permanent disability and Departing Australia Superannuation Payments. Refer to the Super Account guide for more details

What you need to provide to enable payment

Once you’ve received approval for payment from the ATO, you’ll need to complete the Early release application – compassionate grounds form and provide it along with any other associated documents. This includes:

  • The letter of approval from the ATO stating the amount approved for release
  • Certified proof of identity documents
  • Copy of your bank statement to confirm the bank account details for your payment if it is approved

We realise that if you’re requesting a payment on compassionate grounds it is likely to be an extremely stressful time for you. Our aim is to make the process as simple as possible – so please make sure that all the required documentation is provided at the time of claim.

If you have any questions or need assistance in completing the application or exploring options to get your finances back on track – just get in touch.

 

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