Australia has a compulsory superannuation scheme to allow Australians to accumulate funds to provide income in retirement as a substitute or supplement to the age pension. Employers must make superannuation contributions of 9.5% on top of an employee’s wage or salary. Tax advantages encourage employees to make additional voluntary personal contributions and funds in superannuation are typically unable to be accessed until the fund holder reaches preservation age and fully retires from the workforce.
There are limited circumstances around when a person my access funds prior to retirement, this includes severe financial hardship or a terminal medical condition. Under compassionate grounds, a superannuation account holder may also access their funds to pay for medical treatment for themselves or a dependent. The Australian Department of Human Services states that Australian or New Zealand citizens or permanent residents may be able to access super to pay for medical treatment or associated travel.
Those wishing to access their super for medical treatment must have a life-threatening illness or injury, or acute or chronic pain or mental illness. They must also show that treatment is not available through the public health system and that costs can’t be met by any other means, for example through selling assets. Early release of super is only for unpaid costs, it can’t be accessed to reimburse medical costs already paid for.
Super used for non-vital procedures
An increasing number of Australians are accessing their super to pay for medical procedures, some of which are considered non-vital such as IVF and weight-loss surgery. Figures recently released by the Australian Treasury show that in 2016-2017, three times as many people obtained early access to super to pay for medical procedures as in the year 2010-2011. In the last financial year around 15,000 people accessed their super to assist with medical costs, totalling $290 million.
Gastric banding only attracts a Medicare rebate for those who meet the definition of morbidly obese and the waiting list for weight loss surgery under the public health system is two or three years. As an elective procedure under the private system weight gastric banding on average costs around $15,000. Private health insurance may cover weight reduction surgery but there may out-of-pocket costs of several thousand dollars associated with it.
Superannuation early release rules have not been significantly updated since 1997, despite a number of changes to superannuation rules over the past two decades, including the introduction of limits on the amount of money that can be put into super before it is charged at the top marginal tax rate.
The Australian Government has announced a review on the early release of superannuation benefits on grounds of severe financial hardship and compassionate grounds with a report expected in March of this year. The public are invited to make submissions to the review until February 12th.