Early release of superannuation on financial hardship grounds 003-09020000

A person generally cannot access their superannuation before they reach their preservation age and have retired. However, in some cases a person can apply for an early release of their superannuation if they meet certain eligibility requirements, including if they are in financial hardship.

Superannuation Industry (Supervision) Regulations 1994

Rules about an early withdrawal of superannuation on financial hardship grounds are not part of social security legislation or determined under the Social Security Act (SSA). The superannuation industry has its own legislation, which governs the release of superannuation.

The financial hardship requirements are outlined in Sub-regulation 6.01 (5) and (5A) of the Superannuation Industry (Supervision) Regulations 1994. These regulations determine if a customer is taken to be in financial hardship for an early release of superannuation, not the SSA.

One requirement a person must meet is about getting a qualifying income support payment for a specified period of time. Services Australia can provide customers with an eligibility letter to confirm if they have met the income support requirements.

According to the Superannuation Industry (Supervision) Regulations 1994, a person is considered to be in severe financial hardship if they have had a:

• continuous period of 26 weeks on a qualifying income support payment immediately before the application. These customers:
• cannot have gaps in payment
• must be current on a qualifying payment at the time of their application
• cumulative total of 39 weeks, at any time after reaching their preservation age plus 39 weeks, and are not retired. These customers:
• can have gaps in payment
• do not need to be current on a qualifying payment at the time of their application

While in some circumstances, the SSA allows for periods of nil or zero rate to be counted as continuous, these sections apply to decisions made under the SSA. The Superannuation Industry (Supervision) Regulation do not have the same provisions and a literal meaning of the word ‘continuous’ applies. Any break in the customer’s payment or periods of nil or zero rate do not count towards the required continuous period.

Income support payment types

The Department of Treasury decides which income support payments allow a customer to apply for an early release of superannuation on financial hardship grounds.

Qualifying income support payments include payment types that are generally designed to provide financial support to people who are unable to support themselves financially due to unexpected life events, such as disability or loss of employment.

Student payments, including ABSTUDY, Austudy and Youth Allowance (full time student), are not qualifying payments for early release of superannuation as they are designed to help in meeting some of the costs of studying, which students have made a voluntary decision to engage in. Additionally, those receiving student payments benefit from higher minimum income thresholds than other payments, which means they can earn more income from employment before their fortnightly payments start to reduce. This provides them greater flexibility to work while studying without affecting the level of Government support they receive.

Services Australia’s only role in the early release of superannuation is to respond to customer’s request for a letter confirming they have received a qualifying income support payment for the required period. The agency has no other involvement in determining if the customer is in financial hardship, or in deciding if superannuation monies can be released.

It is the customer's superannuation fund who is responsible for deciding if the customer:

• is in financial hardship, and
• if they are eligible for an early release of their superannuation

Even if the customer meets the income support requirements and the agency confirms this in a letter, a superannuation fund may decide not to release the funds to the customer for other reasons. The agency cannot review or override a decision.

Eligibility letters are issued by agency staff via the Issue Superannuation Advice workflow in Process Direct.

Manual letters should only be issued when Process Direct is unavailable, or other extenuating circumstances exist that prevent system letters being issued. For example, multiple and intertwined CRNs or system errors.

Alternatively, a customer may consent to their superannuation fund checking their eligibility online using Centrelink Confirmation eServices (CCeS). This means the customer does not need to obtain a letter from the agency.

The eligibility letter:

• confirms if the customer meets the income support requirements for the early release of superannuation on financial hardship grounds
• is given to the superannuation fund by the customer to help the super fund make a decision about if they can release the customer’s superannuation early
• is valid for 21 days only. A customer will need to request a new eligibility letter if they do not give it to their superannuation fund during this period
• can only be issued on the date that the customer contacts the agency and makes a request for a letter. There are no provisions in the Superannuation Industry (Supervision) Regulations 1994 that allow for backdating of letters, or performing retrospective eligibility checks, for a date before the customer's contact date. This also applies to checks performed by a superannuation fund via CCeS
• is automatically issued to the customer’s myGov inbox if they receive their Centrelink letters online
• should be issued even if there is a review of the customer’s eligibility for payment, for example, a debt is under investigation

Important: Service Officers should not manually issue an eligibility letter (Q230 or Q251), unless manual checks have been performed on the customer’s record to confirm that the customer meets the income support requirements. Issuing a Q230 or Q251 letter incorrectly can cause consequences for the customer when they lodge an application with their super fund, including rejection of their application. This is common when the super fund uses CCeS and the information through the service does not match the information on the customer’s letter.

An involuntary nominee arrangement is where a third party has been given legal right to administer the customer's affairs as the result of a:

• court
• tribunal
• guardianship, or
• administration order

If the Reason for Arrangement on the NORS screen is CRT (Court appointed involuntary nominee arrangement) or PAI (Power of Attorney involuntary nominee arrangement):

• under no circumstances is an eligibility letter to be issued at the request of this customer without their nominee's approval
• contact must be made with the nominee and approval obtained before issuing the letter
• the name of the nominee who gave the approval must be included in the DOC. A copy of the eligibility letter must then to be printed and posted to the nominee
• if the nominee does not provide approval or cannot be contacted, the Service Officer must reject the request for the letter. The customer should be advised that the letter needs to be requested by their nominee

Super funds are able to use the agency’s CCeS service to confirm if the customer meets the income support requirement for early release of superannuation electronically. This means that the customer does not need to obtain an eligibility letter from the agency.

To use CCeS, the superannuation fund administrators or trustees must:

• apply and be approved to use the service
• have the customer's consent before checking their information with the agency

CCeS is fast and effective and can provide an immediate result to the superannuation fund. It also helps to reduce the risk of fraud. If a superannuation fund is interested in applying to use CCeS, they should contact the National Business Gateway - Confirmation Services Helpdesk.

The information given by the agency is explained in the:

• Superannuation Industry (Supervision) Regulations 1994, and
• Retirement Savings Account Regulations 1997

There are no provisions for the agency to:

• review, change or overturn a decision by a super fund to refuse to release a customer’s superannuation early if they do not meet the income support requirements or any other eligibility requirement
• change a decision if the customer does not agree with superannuation legislation or policy
• apply discretion in individual cases

This means customers cannot:

• lodge an appeal to the agency about a decision. Staff must not record a request for an explanation or application for a formal review (appeal) on the customer’s record. If staff record one in error, it must be deleted from the customer's record
• lodge a compensation claim to the agency as a result of an unfavourable early release of superannuation decision

If the customer disagrees with a decision they should be directed to contact the appropriate authority or organisation depending on the reason they disagree. Staff must not encourage customers to lodge a complaint about a decision to the agency, or their local Member of Parliament.

If a customer disagrees with a decision made by super fund to not release their super early

Customers who disagree with decisions about early release of superannuation should contact their super fund.

Even if the customer meets the income support requirements and the agency has issued the customer an eligibility letter to confirm this, the superannuation fund are responsible for the decision to release the funds to the customer.

Note: for applications made under compassionate grounds that have been rejected, customers need to contact the ATO to discuss the decision.

If a customer disagrees with the superannuation legislative or policy requirements

Customers who disagree with legislative or policy requirements should contact the Department of Treasury.

The Department of Treasury is responsible for administering the legislation and policy that decisions are made under for the early release of superannuation.

If a customer disagrees with the decision that they do not meet the income support requirements

If a customer disagrees with an ineligible result as assessed by Services Australia (for example, if the workflow in Process Direct assessed that they have not met the income support requirements), staff can undertake manual checks on the customer’s record to check the result. See Table 2 Manually calculate continuous period and cumulative period and issue eligibility letter.

Service Officers must not manually issue an eligibility letter (Q230 or Q251) unless manual checks determine that the ineligible result, auto-assessed by the system was incorrect.

Raise an incident for further investigation if a system issue is identified that caused an incorrect result.

Claims for release of superannuation on compassionate grounds are assessed by the Australian Taxation Office (ATO).

Tell the customer to visit the ATO website for more details.

Section 7(7)(c) of the Social Security Act 1991 states customers with a New Zealand non-protected special category visa (SCV) cannot receive a payment for greater than 6 months (26 weeks).

Regulation 6.01 (5) of the Superannuation Industry (Supervision) Regulations 1994, states a person needs to be receiving:

• a qualifying income support payment for a continuous 26 weeks, and
• payment on the day the eligibility letter is issued

In practice, this means a person would not be considered receiving a payment for a continuous 26 weeks until the full period has passed (for example, the day after their 26 weeks period ends).

Based on this New Zealand non-protected special category visa (SCV), customers cannot meet the legislative requirements for an early release of superannuation due to financial hardship and are unable to be issued with an eligibility letter (Q230 or Q251).