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Early Release of Superannuation

Sunday, November 01, 2009 - Posted by Philip Harvey

The early release of superannuation can be an effective way for a debtor to clear their arrears and get back on track with their mortgage.  Both ASIC & APRA have some basic requirements that need to be met before superannuation is released.

When reviewing these requirements, you will note that a Credit Card / Personal Loan is not included. Also of note is that an investment property / second property is not included.

ASIC Requirements:

Incapacity 


Requires the debtor to contact the superannuation fund. The debtor may also be paid a 'non-commutable' income stream during a period of temporary incapacity (debtors won't be able to get a lump sum in the case of a temporary incapacity). 

Severe financial hardship 

Requires the debtor to contact the superannuation fund. If the rules allow early release of benefits, you must satisfy the trustee that you have been receiving a Commonwealth income support payment for a continuous period of 26 weeks and you cannot meet your reasonable and immediate family living expenses. 

Compassionate grounds 

Requires the debtor to contact the superannuation fund. If the rules allow early release of benefits, the 'compassionate grounds' are set out in the law. 
Compassionate grounds involve medical treatment for serious conditions that is not readily available through the public health system, transport for medical treatment, changes to a home or vehicle because of a severe disability, palliative care, funeral and burial expenses, or to prevent the forced sale of your home by your mortgagee. 

APRA Requirements:

Medical treatment 

To help pay for medical costs, for you or your dependant, required to: 
- treat a life-threatening illness or injury; and/or 
- alleviate acute or chronic physical pain; and/or 
- alleviate an acute or chronic mental condition 
provided that the treatment is not readily available through the public health system and is not covered by any applicable private health insurance and/or Workers’ Compensation. 

Medical transport 

To assist with the cost of transportation to and from medical treatment, for you or your dependant, when that treatment is required to: 
- treat a life-threatening illness or injury; and/or 
- alleviate acute or chronic physical pain; and/or 
- alleviate an acute or chronic mental condition 
provided that the transport is not readily available through the public health system and is not covered by any applicable private health insurance and/or Workers’ Compensation. 

Mortgage assistance 

To prevent your home from being sold by the lender with whom you have the home’s mortgage. 

This ground does not include rent, or making payment on a mortgage: 
- for which you expect to have difficulty paying in the future (but are not yet in arrears); 
- for which you are in arrears, but not to the extent that the lender has decided to sell; 
- for which one of your dependants, other family member or friend is liable; or 
- that is for a second or investment property. 

The substantiation required from the mortgagee (lender) to satisfy APRA's requirements may be set out in a single letter or document or in separate letters or documents. Providing mortgage account details and BSB numbers will also enable funds to be directly deposited to the mortgage account once they are released by the superannuation fund. Documentation from mortgagees (lenders) must be clear about the mortgagee’s (lender’s) intention to continue or commence enforcement action. Using phrases such as “may proceed”, “may be entitled to commence”, or “reserve the right to proceed” is not considered sufficient to meet the requirements of the 
legislation. The legislation requires that the mortgagee (lender) must state that if the borrower fails to pay the overdue amount, the mortgagee (lender).

LCollect can issue a Mortgage Default Notice on your behalf which satisfies the requirements for superannuation to be released under this category.

Modifications to your home and/or motor vehicle 

To pay for modifications required to accommodate special needs if you or one of your dependants has a severe disability 

Funeral assistance 

To assist with funeral, burial, cremation and other expenses related to the death of a dependant. 

The deceased person must have been reliant on you financially, domestically or personally on you: it is not enough that the person was a family member. 

Care for terminal medical condition 

To provide care for yourself or your dependant if you or your dependant is dying from a terminal medical condition. This kind of care is often referred to as “palliative care”.

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