A senior industry executive has suggested a revision of the rules regarding the legitimate release of superannuation benefits on compassionate grounds may be undertaken by this government or its successors.
Colonial First State head of technical Craig Day made the remark in light of ATO statistics indicating a trend that has seen superannuation released early via these provisions for medical procedures increase significantly over the past six income years.
“It’s worth noting back in 2017 Treasury actually released a consultation paper exploring issues around the release of super benefits on compassionate grounds. They also then released a second consultation paper, with draft proposals, including tightening access on some compassionate grounds in late 2018,” Day said as part of a recent FirstTech podcast.
“But that was never acted upon by the previous government at the time. It is [however] worth noting it could be revisited by the current government, particularly if this trend continues.”
The current superannuation framework allows individuals to withdraw their accumulated benefits early on the basis of several criteria, including for medical treatment and transport, accommodating a disability, palliative care for terminal illness and preventing foreclosure or the forced sale of a home.
However, the significant increase in the number of SMSF members accessing their retirement savings on compassionate grounds for one of these categories in particular was detailed by Colonial First State senior technical manager Tim Sanderson during the same practitioner session.
“The ATO website shows data from the 2018/19 [income year] through to the 2023/24 financial year and there are really two high-level takeouts. Firstly, the amount [of benefits] approved for release for medical treatment and transport has grown substantially over that period of time, while it has decreased for all of those other categories,” Sanderson revealed.
“And the total amount released for medical and transport far outweighs all of the other categories combined in 2023/24. It accounts for $1 billion of the $1.04 billion approved for release in that year.”
With regard to the actual medical treatments involved, he acknowledged more than half of the $1 billion released early was for dental treatment with a further $50 million accessed for weight-loss treatments.
The SMSF Association also recognised this trend late last year.