Why access is restricted

Superannuation receives generous tax concessions on the understanding that the money is locked away to fund retirement. The law preserves super until a specified event occurs. In an SMSF, the trustees are the gatekeepers, so the responsibility to confirm a member is genuinely entitled to access their benefit falls on them.

Preservation age and the common conditions

The most common ways to access super are tied to age and retirement. Preservation age is now 60 for everyone. Broadly, a member can access their super when they reach preservation age and retire, or when they turn 65 even if still working. A member who has reached preservation age but is still working may be able to start a transition-to-retirement income stream, which allows limited access in the form of a pension rather than a lump sum.

The limited special conditions

Beyond age and retirement, the law allows early access in specific, limited circumstances. These include a terminal medical condition, permanent incapacity, and, in tightly defined situations, severe financial hardship or compassionate grounds. Some of these are administered with strict eligibility rules and, in the case of compassionate grounds, require approval before the payment is made.

How to check before paying a benefit

Before paying any benefit, trustees should confirm which condition of release the member is relying on, check that the member genuinely meets its requirements, and gather the evidence that supports it. The fund's trust deed should also be checked to confirm whether the payment should be a lump sum, a pension, or a combination. Documenting the condition met and the decision made forms part of the record-keeping the fund is required to maintain.

A hypothetical example

Consider a hypothetical member, Sophie, aged 61, who has stopped one Job but taken up another. She wants to withdraw a lump sum, assuming that reaching 60 is enough. Accessing super at preservation age usually depends on having genuinely retired within the meaning of the rules, or meeting another condition. Because Sophie is still working and has not turned 65, whether she qualifies needs to be checked carefully before paying anything.

The cost of getting it wrong

Paying a benefit without a valid condition of release is treated as illegal early access. The amount can be included in the member's assessable income and taxed at their marginal rate, with additional tax, penalties and interest possible. The money cannot simply be put back to undo the breach; any attempt to return it is treated as a new contribution.

The specific meaning of retirement

In superannuation, retirement is not simply a matter of feeling retired or reducing hours. The rules define retirement by reference to age and genuine intention regarding future employment, and the test differs depending on whether the member is between preservation age and 65.

Offers that sound too good

The ATO has repeatedly warned that schemes offering early access to super — often for a fee — are illegal. A legitimate condition of release does not require a promoter or an upfront fee.