Mark Gleeson, senior technical service manager for MLC, said in an online webinar that the 39-week rule is not one that is commonly used, but is still available and allows access to 100 per cent of a member’s super if they meet the criteria.
Gleeson used the example of Ricardo, aged 61, who had his employment terminated just before he turned 60. He’s been on job seeker payment for 18 months, is not currently employed, and wants to access $50,000 from his superannuation.
“The question is can Ricardo access $50,000 from his super? The choices are (a) no, it’s only $10,000 under severe financial hardship, (b) yes, under compassionate grounds, (c) yes, under financial hardship, or (d) he can declare permanent retirement,” Gleeson said.
“We know Ricardo ceased employment just before age 60, so we don’t have the condition of release where we’re age 60 and then cease employment. The main problem [in this scenario] is that he has been on job seeker payments, so you can’t say you are available for suitable paid employment and access super under the condition of permanent retirement.”
Gleeson continued there is another option – the 39-week rule – which is often overlooked in the advice process.
He continued that in regard to the condition of release for severe financial hardship, there is a 26-week rule that is applied.
“We can use this condition of release at any age but beyond age 65 we don’t need this one. What we do is apply to the trustee for this condition of release, which stipulates you have to be on income support for a continuous period of 26 weeks,” he said.
“These include Commonwealth income payments, such as disability support pension, and carer payments. In our example, Ricardo is on job seeker payment. You also have to prove you are unable to meet reasonable and immediate family living expenses. The trustee will want proof of that.”
The trustee will also need proof of assets, liabilities, income and expenses, he added, to justify why the member needs the funds.
“Another problem with the 26-week rule is that it is limited to $10,000, which has never been indexed to inflation and 15-20 years ago that was worth a reasonable amount but now it’s not worth much at all,” he added.
“The positive side is that the 39-week rule is less common, but it’s still available, and allows access to 100 per cent of the benefit. The criteria is that you must be 60 years of age plus 39 weeks and have been on income support payments for a cumulative period, not continuous, for a period of 39 weeks or more since turning age 60.”
He continued that in the example, this means that Ricardo could access $50,000 from his superannuation as he has met this condition.
Scott Quinn, senior technical services manager at MLC, added that most people believe that severe financial hardship is all about providing evidence, which can be onerous.
“With the 26-week rule you have to prove you can’t support yourself and a lot of people forget that there is the 39-week rule that becomes available post age 60,” he said.
