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While a release of retirement money on compassionate grounds is possible, the option is only available in very limited circumstances and strict criteria must be met.
Superannuation savings will only be released to make mortgage payments if a person does not have the financial capacity to pay the mortgage, and their mortgagee is threatening to repossess or sell their home.
Taxpayers are only able to withdraw superannuation under severe financial hardship after receiving government income support payments continuously for 26 weeks and if they are unable to meet reasonable and immediate living expenses.
Further, payments from a super fund are limited to a maximum of $10,000 every 12 months.
“If you are voluntarily salary-sacrificing into your super fund, instead of paying your mortgage, you will not qualify for compassionate grounds because you have the financial capacity to make your mortgage repayments by accessing your employment income,” the ATO said.
“Improper early access to your super is illegal – there are severe consequences for you and your fund if you access your super before you are legally entitled to do so. These include disqualification of trustees, the fund being made non-complying, imposition of administrative penalties, and prosecution.
“Any money accessed illegally will also be assessed as income for the individual and taxed at the applicable marginal tax rate.”