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Accessing Superannuation for Mortgage Defaults

Thursday, November 12, 2015 - Posted by Philip Harvey

In our recent dealings with the Department of Human Services and a number superannuation funds concerning the release superannuation to stop a mortgage repossession, we learned some interesting anecdotal information:

  • The Department of Human Services advised the maximum amount that can be released is $26,885.26 to stop mortgage repossession
  • The Department of Human Services website advises that the maximum amount that can be released is the value of 3 months arrears AND 12 months interest.
  • Some superannuation funds have their own rules on the maximum amounts that can be released. $10,000 is a common figure we see.
  • For Self Managed Superannuation, the ATO website provides a maximum release of $10,000 in severe financial hardship.
  • This is the same figure the ATO advises for other superannuation funds.
  • As at the time of writing this, applications to the Department of Human Services are taking 4 weeks to process, with incorrectly completed forms returned.
  • The number of applications is increasing. Should this continue, the 4 weeks processing time will increase unless further resources are deployed.
  • A superannuation trustee requires the Department of Human Services to provide a letter in order to release funds.
  • Superannuation funds take at least 14 days to process the release of funds. In our experience this varies enormously.
  • We have one matter where 4 weeks have so far passed and the superannuation trustee has still not provided the release of funds.
  • Any superannuation release is taxed, so the amount released will not be the amount that is applied to the mortgage.

What can we take from all this?

  • If a superannuation release is going to be requested, it should be requested once a Real Property mortgage default notice has been received to allow sufficient time to be processed.
  • Furthermore, there should be open lines of communication between the mortgagor and mortgagee to avoid unnecessary costs.
  • There is no certainty in the final amount that may be released, though there is a very strong underlying intention from the Department of Human Services affording the opportunity for people to remain in their home.

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