Can I access my super to pay off debt?


Has your financial situation started to get out of hand? It’s very tempting to access your superannuation fund — a healthy lump of savings — to pay off debt. 

The good news is that you can access your super due to severe financial hardship or access your super on compassionate grounds. However, the bad news is that it may negatively impact you later in life. For instance, you may not enjoy an early retirement.

Yet, if paying off your debt is your priority, it is possible to apply for early release. 

Let’s get to the following commonly asked questions:

  • What is super or superannuation?
  • Can I use my superannuation to pay off my debt?
  • Should I use my super to pay off my debt?
  • What long-term effect on my super if I use it to pay off a debt? 
  • What are alternatives to using super to pay a debt?

Q1. What is a super or superannuation fund?

If you're considering making a super withdrawal, you must know your superannuation fund. When you retire, you will receive an age pension from the government. 

However, to live financially independently, you should grow your super throughout your working life. Your employer legally must pay into your super.

Like any other investment, your super contributions build wealth over a long period to aid your retirement income. 

Important: Before applying for access to super to pay off debt, consider whether it’s the most financially sound option. 

Q2. Can I use my superannuation to pay off my debt?

Yes. The ATO states that people can access their supers once in 12 months to withdraw a lump sum before they have reached preservation age. 

If you’re struggling to pay rent and other bills, you may meet the ATO’s eligibility criteria for financial hardship. Here are the requirements to access super lump sums. 


There are two main reasons the ATO may let you access your super early:

  • Access due to severe financial hardship grounds.
  • Access on compassionate grounds.

Severe financial hardship means you cannot meet living expenses and have received continuous government income support payments. Compassionate grounds refer to medical treatment, funeral expenses, making a mortgage repayment or paying council rates. 

Other potential reasons you may access your super:

  • Temporary residents leaving Australia.
  • You have less than $200 in your superannuation fund.
  • You have a terminal medical condition.
  • Due to temporary incapacity or due to permanent incapacity.

What does it mean to be in financial hardship?

Access due to severe financial hardship doesn't mean you can use your superannuation to pay any debt. It would help if you met the Australian Taxation Office's definition of financial hardship:

To meet both of these criteria:

  • Receive continuous government income support payments for 26 weeks.
  • You cannot meet reasonable and immediate family living expenses.

You must withdraw a minimum of $1,000 and a maximum of $10,000.

Note: If you face severe financial hardship, seek financial advice before withdrawing from your super. 

How to apply

Applying for access to your super funds before you reach your preservation age depends on the condition of release.

  • Compassionate grounds: Apply through ATO.
  • To pay a loan repayment or council rates: Apply through ATO.
  • Suffering from financial hardship: Apply directly to your super account. 

Q3. Should I use my super to pay off my debt?

Just because your super fund has a lump sum of money doesn’t mean it’s the answer to your debt negotiation. If you’re facing severe money anxiety, speak to financial advisers before withdrawing your super contributions. 

You may need to apply for a super release to pay debts. However, it shouldn’t be your first debt solution. You may regret access to your superannuation later in life. 

Can I access my super to pay off my mortgage?

Buying a home is an exciting prospect. However, it comes with the unfortunate heavy burden of paying your mortgage. When the worst-case scenario hits, you may find that you cannot pay your loan.

To avoid losing your home, you can use your super fund to help you get back on track. Ensure that you check every other possible alternative before withdrawing your retirement fund. You must apply through the ATO website. 

How much of my super can I access early? 

There are limits if you satisfy the ATO requirements and access your super early to pay off your debts. You must withdraw a minimum of $1,000 — or up to your remaining balance after-tax if your super has less than $1,000. 

You can withdraw a maximum of $10,000 for financial hardship.

Note: There are a few exceptions. For instance, if you have reached your preservation age and face financial hardship, there is no limit to withdrawing super to pay debts. 

Q4. What long-term effect on my super if I use it to pay off a debt? 

If you access your super too early, you might find your retirement funds are not as substantial as they might have been. However, beyond compound interest and loss of funds, there are a few other disadvantages to accessing super funds early.

  1. You lose insurance benefits. While your superfund remains untouched, an insurance policy protects it from your creditors. You lose this protection when you withdraw funds. 
  2. You must pay tax. If you withdraw $10,000, you will only receive around $8,000 after paying tax. There are no special tax rates for super withdrawals due to financial hardship, but you must pay between 17 - 22% tax on your lump sum if you are below 60.
  3. Not all superannuation funds allow account holders to withdraw due to financial hardship or on compassionate grounds. 

Q5. What are alternatives to using super to pay a debt?

While you can use your superannuation funds to pay a debt in times of financial difficulties, other options are available. 

If you find yourself overwhelmed by debt, speak to financial counsellors. Many debt-relief schemes help you efficiently pay off your loans, credit cards, and other payments.

Moreover, consider sourcing other income streams. If you’re part-time employed or unemployed, the lack of income will severely dent your current and future financial situation. 

Consider taking on a side hustle to supplement your income, help you pay debts, and tide you over until you find steady employment. 

It would help if you aimed to leave your superannuation alone until you reach preservation age. If you have to withdraw super funds, consider adopting a strategy to avoid doing so again. For instance, set up an emergency fund. 

Deposit between three to six months' worth of living expenses in your emergency fund to help you should you face severe financial hardship again. That way, you won’t impact your retirement savings. 

Summing up

It’s helpful to know that you can access your super fund anytime for financial hardship and compassionate grounds. However, if you can avoid touching your retirement savings, it’s best to find other ways to pay your debt off and only as a last resort, use super. 

Wait! We’d love to hear your thoughts

If you enjoy using our app, please take a moment to rate it in the App Store. Your feedback in the past has tremendously helped us at WeMoney to improve the app to help it be the best that it can be. A massive thanks to each one of you for making that happen!

Disclaimer: The author is not a financial advisor, and the information provided is general and was prepared for information purposes only. This information does not consider your investment objectives, particular needs, or financial situation. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for investing, financial or other decisions.

Turn your learnings into practice
Try WeMoney today.