Hi Tammy, I am barely making my mortgage repayments and I am worried I am going to lose my home. I have all this money in Super, but I can’t pay the bills. What can I do?
Thanks, Sam, Beacon Hill.
Thank you for reaching out, I am sorry you are going through this. Apart from exploring all options to reduce spending and increase income, there are a few things you can do.
Firstly, speak to your mortgage provider. Can they discount your interest rate, temporarily reduce repayments, or give you a break from repayments? Can you refinance to reduce repayments by extending the loan term? For overdue bills, contact the provider to discuss a payment plan.
Secondly, speak to Centrelink. Are you eligible for any payments or other assistance? Contact the Financial Information Service to get support.
When you have exhausted all other options, you may be able to access Super on severe hardship or compassionate grounds.
To be considered in severe financial hardship, you must be unable to pay your essential family living costs and have received Centrelink support for 26 continuous weeks. Eligibility is determined by your Super fund. You can request up to $10,000 per 12-month period. Have multiple funds? You can request up to $10,000 from each fund.
To prevent foreclosure or forced sale of your home, you can access your Super under compassionate grounds to pay eligible expenses you cannot otherwise afford, such as mortgage payments, council rates and strata levies. Eligibility is determined by the Australian Tax Office. You must have received written advice that your principal residence is to be foreclosed, sold, or repossessed from your lender, council or by court order. The eligible expense must be unpaid. You must have ruled out all other options, including selling investments, getting a loan or using a credit card. There is no maximum limit on eligible expenses, the exception being mortgage arrears. Mortgage withdrawals are limited to three months repayments plus 12 months interest on the outstanding loan, once per 12-month period.
The Super fund may withhold up to 32 per cent tax. You need to confirm you have sufficient funds to pay the withdrawal plus any tax and fees. You may also need to include the withdrawal in your tax return and pay additional tax, depending on your personal tax position.
It is important to also consider the impact on any insurance you hold in Super. Are there sufficient funds remaining to pay premiums?
Quick Tips: Accessing Super is only a short-term fix and will impact
your retirement balance. You must increase your income to cover your expenses
(can you rent out a room?). Otherwise, downsizing may be the best option for
your financial and personal well-being.
Feel free to call me on 8376 0350 if you have any further questions or need assistance.
Financial planner Tammy Marshman of Up Wealth Management is an Authorised Representative of Consultum Financial Advisers Pty Ltd, AFSL 230323. Phone 8376 0350 or visit upwealthmanagement.com.au.
This is general information only, as in preparing it, we did not take into account your personal objectives, financial situation or needs. Before acting on this information, consider whether it is appropriate for your circumstances. Although the information is considered reliable, we do not guarantee that it is accurate or complete, and you should not rely upon it.
Please seek financial advice specific to your situation before making any financial, investment or insurance decision.