Q: My brother is 59 and about to be made redundant. He is an unskilled worker and divorced. He has a loan for the home he lives in which he already half owns. Can he use his superannuation to pay off this loan and fully own his home and then be eligible for unemployment benefits (since he won't be old enough for the aged pension)?
Our expert is Brian Corboy from the Financial Planning Association of Australia
I am sorry to hear about your brother’s situation.
To properly answer your question, I do need more information. However, I am able to provide some general information relevant to your query.
To access his superannuation benefits your brother needs to meet a “condition of release”. There are several conditions of release, however two may relate to your brother’s situation.
The first is retirement on or after age 55, and the second is termination of gainful employment if he has “restricted non-preserved benefits” in his superannuation.
You have not mentioned if your brother is going to retire from the workforce. If he is going to retire then his superannuation benefits are available.
However, as he is under age 60 there may be some tax considerations he has to take into account if he wants to withdraw funds from his superannuation account.
If he has retired, it may be worth waiting until he reaches age 60 before withdrawing his benefits as they are likely to be tax free after his 60th birthday.
If you brother isn’t going to retire then the only other option he has to withdraw superannuation benefits is if he has unrestricted non preserved or restricted non-preserved benefits in his superannuation fund.
Unrestricted non-preserved benefits are eligible to be withdrawn at any time (these types of benefits do not need to meet a condition of release).
If you brother has any restricted non-preserved benefits he maybe able to withdraw these benefits on his termination of employment.
As he is under age 60 there maybe some tax issues applicable to the withdrawal, therefore I’d suggest that if he is eligible to withdraw funds, he might want to wait until his birthday as this would help ease the tax issue.
Once again, in regards to your query about Newstart Allowance, we need to know a lot more information to provide a proper answer to your question.
However, the general position is that Centrelink will apply two tests, one being the income maintenance test which relates to his termination package, in short any part of his package that he is being compensated for in regards to loss of income will be used to calculate how long he has to wait before he can apply for benefits.
The other test is the liquid assets test. If you brother has more than $5500 of liquid assets (bank accounts etc.) he may have to wait up to 13 weeks before he is eligible to receive any benefits.
I would strongly suggest that your brother consult a qualified financial planner to further discuss his options.
With full details of his current financial situation other strategies may be available to help your brother improve his situation.
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