Accessing superannuation - Mortgage stress

Mortgage stress logoYou may be able get access to part of your superannuation when you are behind on your home loan repayments. This is usually only possible on compassionate grounds to prevent your home from being repossessed or sold, or if you are receiving government income support payments and are in 'severe financial hardship'.

There are other conditions to being able to access your superannuation to repay your mortgage. The process can take several months and there is no guarantee your application will be successful.

Accessing superannuation should be an option of last resort. You should check that taking money out of your superannuation will actually avoid having to sell your home or the lender taking possession. There is no point selling your possessions, accessing your superannuation or getting new loans if you will need to sell your home anyway. 

You should discuss this option with a financial counsellor before taking any steps to access your superannuation. 

Possible problems in getting your superannuation

Problems that may occur when you try to access your superannuation include:

  • The lender may not agree to giving you time to access it.
  • The lender agrees not to exercise its power of sale by a certain date, but your application to release your superannuation is refused, or not approved in time. 
  • There is a delay by the lender in giving the required information and confirmation to your super fund, which means the amount eventually released is not enough to now cover your arrears (because your interest debt is still growing).

More things to think about before accessing your superannuation

The amount you can withdraw from your superannuation is limited and varies depending on whether your application is based on severe financial hardship or on compassionate grounds. 

You may need to pay tax on any amount you withdraw, which reduces the final amount you will end up with to put towards your mortgage.

If your total debts are greater than what your house is worth, you should think seriously about leaving your superannuation in its super fund. If you are forced to sell your house and do not have enough money to cover your debts, you could end up bankrupt. While your superannuation is in a super fund, it is usually protected from bankruptcy. If it has been withdrawn from your super fund, it loses that protection. More information on bankruptcy is available from the Australian Financial Security Authority.

      How to apply to access your superannuation

      You should discuss this option with a financial counsellor before taking any steps to access your superannuation. 

      The best way to avoid problems with accessing to your superannuation is to negotiate a hardship variation with your lender (including through the Australian Financial Complaints Authority (AFCA)) that does not rely on being able to access your superannuation. 

      To access your superannuation
      • Read the information on getting early access to your super from the Australian Taxation Office website, which also covers how early release payments are taxed.
      • Applications for access on compassionate grounds are made directly to the ATO, and can be done online. You will need to include a letter from your lender that provides supporting evidence for your application.
      • If you are applying on the basis of severe financial hardship, you will need to contact your superannuation fund to ask about how to apply for money to be released.

      Checklist before accessing superannuation

      DO

      ✓✓ Negotiate a financial hardship variation with your lender or AFCA. 

      ✓✓ Get advice on whether accessing your superannuation is a good idea in your situation.

      DON’T

      ✗✗ Rely on getting your superannuation to solve all your problems.

      ✗✗ Access your superannuation if you will probably need to sell your home anyway.

      ✗✗ Negotiate a hardship variation that depends on getting your superannuation (as it may not happen). 

      ✗✗ Think the lender will not proceed with legal action simply because you trying to access your superannuation.

      Disclaimer

      The information displayed on this page is provided for information purposes only and does not constitute legal advice. If you have a legal problem, you should see a lawyer. Legal Aid Western Australia aims to provide information that is accurate, however does not accept responsibility for any errors or omissions in the information provided on this page or incorporated into it by reference.