Early release of superannuation to prevent foreclosure

You may be able to withdraw some of your super early to prevent the foreclosure or forced sale of your home by your mortgage lender, council, or by court order to satisfy a debt you owe another entity.

However, there are specific eligibility criteria and conditions that must be met for an individual to qualify for this type of early release. If you do not meet all the criteria and conditions, then you will not be eligible for early release.

If the amount needed to stop the forced sale of your home is more than what you have in your super then you will need to consider other options.

Applications are submitted to the Australian Tax Office. However, not all super funds allow early release, so it is important to check this before making an application.

This page outlines the steps you can take if you have received a threat to repossess or sell your home and you are considering early access to your super to stop this from happening.

If you complete the steps below and your problem still hasn’t been solved, or you’re feeling overwhelmed, call us on 1800 007 007 to speak with one of our financial counsellors.

Steps to take if you’re considering early access to super

01

Consider other options

It may be tempting to view accessing your super early as a quick fix, but super is meant to be for retirement.

You will be using future retirement income on an asset that you may lose if your financial hardship is not temporary, and you cannot return to meeting your normal repayments. This means you would be worse off in the longer term.

Any super you withdraw early can only be used to make payments that will prevent the repossession and sale of your home by:

Your mortgage lender, due to mortgage arrears.
Your council, due to council rates that have been outstanding for more than 2 years.
An enforcement officer who has been given authority in a court order to sell your home to satisfy an outstanding debt, such as strata levies or body corporate fees, you owe another entity.

The funds can’t be used to pay mortgage arrears or council rates for a property that is not your principal place of residence, for another person, rent arrears or general living expenses.

Note: If you have received letters of demand or any court documents threatening repossession, you only have a certain amount of time to take action. If this has happened to you, contact us on 1800 007 007 immediately for advice.

TIPS – Alternative options

Before opting for early access, explore and consider all other options, including:

Raising extra money to pay the arrears:

Concessions, grants and other financial assistance available to help with living expenses such as food, rent, electricity, gas or water bills.
If your income has reduced or your living arrangements have changed, check if you are eligible to receive an income support payment or other payment from the Government. The Centrelink Payment and Service Finder can help you understand what Centrelink payments and other government assistance you could be eligible to receive.
You may qualify for a Centrelink advance payment if you already receive a Centrelink payment. You will need to pay this back over time out of future payments from Centrelink.
If you are employed and have unused annual leave entitlements, you could ask your employer if you can cash these in and have them paid out.
Are you expecting a tax refund but haven’t completed your tax return yet? If yes, then get your tax return in as soon as possible. You could get free help with completing your tax return from the ATO’s National Tax Clinic program.
Review your budget and see if there are expenses you can reduce or get a better deal on for example: subscriptions, memberships, entertainment, phone / internet, insurances, etc. In addition to this, consider if you can take on some extra work and earn more income.
Consider renting out a spare room, if you have one and it is safe to do so, to bring in some extra income.

Request hardship assistance from your creditors:

Remember, when you are behind on your mortgage or council rates, you need an agreed arrangement in place while you apply to access your super. Otherwise, there’s a risk that they might start legal proceedings to sell your property while you’re waiting for approval.
See our Home Loans page for more information about your mortgage hardship assistance options and the steps you can take.
You may also be able to enter into an agreement to prevent foreclosure action until you raise money by mortgaging or selling another property you own.
See our Council Rates page for more information about your hardship options and the steps you can take.
If you are struggling to pay your strata levies or body corporate fees, see our Strata Levies page for more information about your options and the steps you can take.
You can also request hardship assistance, such as reduced repayments or more time to pay, from your creditors on other debts you may have such as credit card and personal loan. See our Hardship Assistance page for more information about your rights and creditors obligations under the law.

Sell assets:

Consider selling items that you own but that you no longer use or need.
If you own another property, such as vacant land or investment property, consider selling one or more of your properties. The ATO may not agree to a release of your super on compassionate grounds unless you can show why you have not been able to sell other properties to raise funds needed to prevent the threatened foreclosure or sale of your home.
See our Selling Assets page for more information.

The Mortgage Relief Scheme:

The ACT and Queensland have government-funded mortgage relief schemes for resident homeowners struggling with short term, severe financial hardship. In these schemes, interest-free loans are offered to cover arrears and some future payments.
Each of these states/territories has their own strict eligibility requirements. For more information, contact:
- Department of Revenue (ACT)
- Department of Housing (QLD)
We recommend you speak to a financial counsellor if you believe you may benefit from one of these schemes.

Remember, making an informed decision is crucial, and our financial counsellors are here to assist you to do this.

Our financial counsellors can provide valuable insights and guidance tailored to your situation. If, after exploring alternatives and consulting with a financial counsellor, you find your current needs more pressing than future retirement needs, early access might be beneficial.

LONG TERM FINANCIAL HARDSHIP

If your financial hardship is not temporary and you will not be able to reasonably meet ongoing mortgage, council or strata payments, you may need to consider selling your home. Sometimes selling your home might be the best option.

If you are in this situation, call and speak to one of our financial counsellors on 1800 007 007 to independently explore your options.

02

Assess the impact

Understanding the impact of early withdrawal of money from your superannuation is a crucial step in making an informed decision.

Possible impacts

Take the time to consider the following impacts and how they apply to your individual circumstances.

Less available in retirement:

Accessing super early means you will have less money in retirement or should you face another period of financial hardship.

Loss of protection from creditors:

Funds in superannuation accounts are protected from creditors. When funds are released early, they lose this protection.

May not pay off all your debts to prevent foreclosure:

The maximum amount that can be accessed from your super in a 12-month period to prevent foreclosure from a mortgage lender is the sum of both 3 months of normal repayments and 12 months interest on the outstanding loan balance.
This cashing restriction does not apply to prevent foreclosure due to council rate arrears or a court order for an outstanding debt you owe another entity.
However, if you don’t have enough super funds available to pay the amount needed to prevent the foreclosure of your home, the ATO may not approve the release of any funds.
That is why it is important to speak with a financial counsellor to go through all your options, including hardship assistance, before accessing your super

Early access to super withdrawals are taxed:

Any super you withdraw for this purpose will be taxed and the tax amount will be deducted from the lump sum payment. If you are under 60 years old, tax of approximately 22% will be deducted.

Impact on government income support payments:

While generally not impacting government income support payments, the effect may vary based on the type of income support or pension you receive, your age, and how much you withdraw. Contact Centrelink or Department of Veterans Affairs first to assess the impact based on your individual circumstances.

Your super fund may not allow early release:

Super funds are not obligated to grant early access. If yours doesn’t, and after consulting with a financial counsellor, you’re confident it’s the right move, consider switching to a fund allowing early access. Though be mindful of transaction costs and potential loss of insurance cover.

03

Check your eligibility

The rules for accessing your super early to prevent the threatened foreclosure or forced sale of your home are strict. If you do not meet all the criteria and conditions, then you will not be eligible for early release.

Forced sale by your mortgage lender or council:

If you want to access your superannuation early to pay your mortgage or council rate arrears, to prevent the foreclosure or forced sale of your home, you need to meet all of the following conditions:

Your home: The property under threat must be your principal place of residence (your home).
Financial responsibility: You are legally responsible for the mortgage repayments or council rates on the property.
Received written notice: You have received written notice of foreclosure or forced sale of the property from:
- Your mortgage lender, who has provided you with a Default Notice.
- Your council, stating that your council rates have been outstanding for more than 2 years.
Financial capacity: You have no ability to pay the amount needed to prevent the foreclosure or forced sale of the property without accessing your super.
Supporting documents: You have all the required documents to support your eligibility.

Forced sale by court order from another entity:

If you want to access your superannuation early to prevent the forced sale of your home under a court order to satisfy an outstanding debt you owe another entity, such as strata or body corporate, you need to meet all the following conditions:

Your home: The property under threat must be your principal place of residence (your home).
Financial responsibility: You are legally responsible for payment of the amount listed on the court order.
Received written notice: You have received written notice of foreclosure or forced sale of the property from:
- The court, in a court order, that lists you as the debtor and authorises an enforcement officer (or court sheriff) to sell your home to satisfy in full or in part the amount owing to another entity (creditor) as listed on the judgement.
- The court appointed enforcement officer, in a letter, that states they will now proceed to sell the property (your home) in accordance with the court order, the address of the property they intend to sell, and the current amount owing that must be paid in order to prevent the sale.
Financial capacity: You have no ability to pay the amount needed to prevent the foreclosure or forced sale of the property without accessing your super.
Supporting documents: You have all the required documents to support your eligibility.

If you have borrowed money to pay:

If you have settled the amount to prevent foreclosure on your home by borrowing money, you can still apply for early release on compassionate grounds.

You will need to have met all the above criteria at the time the amount was outstanding, and you will still need to owe the amount borrowed.
Further, you will also need to provide additional evidence and meet extra eligibility criteria for the borrowed amount.

For more information about the additional eligibility criteria and evidence required see Australian Tax Office | Accessing super to repay borrowed amounts for eligible expenses.

04

Submit an application

Applications on compassionate grounds to prevent foreclosure are submitted to the Australian Tax Office (ATO).

To apply you will need to use the ATO online form accessed from your MyGov account. Alternatively, you contact the ATO and request a paper application form to submit your application.

If the ATO is not satisfied with your application, because you do not meet all the eligibility conditions and/or you haven’t provided sufficient evidence, they may not approve your application. Additionally, if you don’t have enough super funds available to pay the amount needed to prevent the foreclosure of your home, the ATO may not approve the release of any funds.

Forced sale by your mortgage lender:

If you want to apply for early access to pay your overdue mortgage repayments (arrears), to prevent the foreclosure or forced sale of your home by your mortgage lender, you need to provide all of the following evidence:

A gas or electricity bill that is in your name, shows the address of the property (your home) and is less than 3 months old.
A default notice or similar issued from your mortgage lender for each loan secured by your home.
A letter from your mortgage lender on their letterhead, dated no more than 30 days before the date of your application for early release, addressed to you, for each loan secured against your home, confirming:
- that payment of an amount is overdue, and they will foreclose or force the sale of your home if the overdue amount isn’t paid by the due date
- the amount owing that must be paid to stop the action to sell or take possession of your property
- the address of the property under threat of sale
- the amount equal to 3 months of repayments for the loan
- the amount equal to 12 months interest on the outstanding balance of the loan
- the name of the person(s) legally responsible for the loan and the loan account number.
Note: The maximum amount that can be accessed from your super in a 12-month period to prevent foreclosure from a mortgage lender is the three months of repayments and 12 months interest on the outstanding balance of the loan.
Where the mortgage arrears have been paid by borrowing money (separate to the mortgage) you will also need to provide additional documents required to support the borrowed amount.

Forced sale by your council:

If you want to apply for early access to pay your overdue council rates (arrears), to prevent the foreclosure or forced sale of your home by your local council, you need to provide all of the following evidence:

A gas or electricity bill that is in your name, shows the address of the property (your home) and is less than 3 months old.
A letter from the council, on their letterhead, dated no more than 30 days before the date of your application for early release, addressed to you, confirming:
- that payment of an amount is overdue, and they will foreclose or force the sale of your home if the overdue amount isn’t paid by the due date
- the amount owing that must be paid to stop the action to sell or take possession of your property
- the address of the property under threat of sale
- that you owe a minimum of 2 years or more of council rates and an itemised list of the arrears for each year.
Where the council rate arrears have been paid by borrowing money, you will also need to provide additional documents required to support the borrowed amount.

Forced sale by court order from another entity:

If you want to apply for early access to prevent the forced sale of your home under a court order to satisfy an outstanding debt you owe another entity you need to provide all of the following evidence:

A gas or electricity bill that is in your name, shows the address of the property (your home) and is less than 3 months old.
A copy of the court order that lists you as the debtor and authorises an enforcement officer (or court sheriff) to sell your home to satisfy in full or in part the amount owing to another entity (creditor) as listed on the judgement.
a letter from the enforcement officer that states all of the following:
- they will now proceed to sell the property (your home) in accordance with the court order
- the address of the property they intend to sell
the current amount owing that must be paid in order to prevent the sale.
Where the outstanding debt has been paid by borrowing money, you will also need to provide additional documents required to support the borrowed amount.

TIPS

Before applying check that:

You meet all the eligibility conditions for early release.
You have all the documents and evidence required by the ATO to support your application.
Your super fund allows early release on compassionate grounds to prevent foreclosure or forced sale of your home.
Remember, your super fund is not obligated to release your funds early if their policy does not allow it. If you are in this situation, call 1800 007 007 and speak to one of our financial counsellors.
You have enough in your super fund to cover the debt amount plus withholding tax.
The amount of funds you can access will pay off all the debt and stop the foreclosure or forced sale of your home. If it doesn’t, and you can’t show the ATO how you will make up the difference then they may not approve your application.

Find out more about eligibility, evidence required and how to apply for early release of super to prevent foreclosure or forced sale of your home on the Australian Tax Office website

05

Speak to one of our financial counsellors

If you’re feeling overwhelmed and need some help to deal with your financial hardship, you can speak with one of our financial counsellors.

Financial counsellors aren’t judgmental about your circumstances – they’re here to offer you free, confidential and independent advice and assistance.

To speak to a financial counsellor you can:

Call the National Debt Helpline on 1800 007 007 – open Weekdays from 9:30 am to 4:30 pm.
Use our live chat service by clicking the chat icon in the bottom right corner of your screen. Live chat is available 9:00 am to 8.00 pm weekdays. If you send a message outside these hours a financial counsellor will get back to you.
Make an appointment to see a financial counsellor in your local area – Find a local Financial Counsellor.