Insights – Early Access to Super – Medical Access
The sole purpose of your superannuation fund is to provide for your retirement. But what if a treatable but expensive illness or injury may prevent you from ever reaching retirement?
Thankfully, there are limited provisions within the superannuation legislation to provide access to your super for treatment of such injuries or medical conditions not only for yourself but for your dependents as well.
To be eligible to access the general compassionate release of super provisions you must:
- Not yet paid the expense
- Not be able to afford the expense without accessing your super
The ATO considers medical treatment to be the application of medicines, surgery, or psychotherapy to restore or preserve health, or cure an illness, disease or other medical condition by a registered medical practitioner. This excludes treatment from an allied health professional, such as physiotherapy, psychology and podiatry unless they are part of the medical treatment certified by a registered medical practitioner.
To meet the eligibility criteria:
- You or your dependent (spouse, child) require medical treatment:
- the medical treatment is not readily available through the public health system.
A potentially life-threatening illness will generally not be sufficient to meet the requirements.
The most common medical releases are for weight loss surgery and IVF.
There is an online an ATO Compassionate release of super form (via MyGov) which requires evidence of a clear and direct link between the life-threatening condition and the treatment required.
- Quote or unpaid invoice
- this must be itemized quote or an unpaid invoice that shows the amount and a description of each component. A single lump sum as a quote or unpaid invoice will be insufficient in many cases.
- Two ATO medical reports (signed less than six months before you submit your application)
- one from a registered medical specialist (must be specialized in the area in which they are giving their opinion)
- one from either a registered medical practitioner or a registered medical specialist
If you have a self-managed super fund, you still need ATO approval to access your super early.
Financial & Tax Implications
The withdrawal from super does have tax implications – Tax is payable on the taxable component of the lump sum at 22% or marginal rate (whichever is lower), tax free component is tax free.
Releasing your super early is assessable income and will need to be included it in your tax return. Therefore, it can affect any family tax benefit or child support you receive.
There is also a long-term cost to your retirement balance with less money being able to grow over time into a significant balance.
Australians withdrew more than half a billion dollars from their retirement in 2020 under the broader compassionate release provisions. The impact for the superannuation system and individuals’ retirements over the long term may have cause for concern.
However, for individuals going through a medical crisis, access their super to finance the care and treatment needed can only offer some peace of mind.
How Can Alto Help?
Alto can help you understand the requirements and the tax implications of withdrawing the funds as well as manage the compliance of your SMSF.
Author: Scott Coghlan