‘Can a 58-year-old, full-time worker use their super to pay off a mortgage?’

Q: I’d like to ask a question on behalf of my 58-year-old sister who is working full-time and would like to pay off her $170,000 mortgage using her superannuation. She has $200,000 in one super account and $500,000 in the other. Can she do this now? If not, when and how does she go about withdrawing super?

A: The rules around super define all contributions made by or on behalf of a member, and all earnings on contributions made since June 30, 1999, as preserved benefits. To cash in preserved benefits, the super account holder must have reached their preservation age and meet one of the conditions of release.

As your sister is 58, she has already reached her ‘preservation age’. That means, in general terms, if she meets a condition of release she can access her superannuation monies. The most common conditions of release for paying super benefits are that the member:

• has reached their preservation age and retires
• has reached their preservation age and begins a transition-to-retirement income stream
• ceases an employment arrangement on or after the age of 60
• is 65 years of age (even if they haven’t retired)
• has died.

Nobody has much appetite for utilising the last item in the list above and therefore she must meet one of the other requirements. If she continues to work full-time (or even part-time) until age 60, she cannot access her super. After 60, she could only access is super by terminating her employment and then subsequently recommencing employment with a different employer. Other than that, she will need to wait to age 65 or take earlier retirement.

The only other possibility is that she can access what is called ‘unrestricted non-preserved benefits’ that can be paid on demand to a super fund member at any time. Unrestricted non-preserved benefits could, for example, be benefits for which an account holder has previously satisfied a condition of release but decided to keep in their super account. Your sister would need to check with her superannuation provider whether she has any monies in this category but normally it is quite rare.

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