The latest ATO statistics have shown a nearly 20 per cent increase in requests for the early release of superannuation savings on compassionate grounds in the last financial year, with more than half of new applications related to dental and weight-loss treatments.
According to the data, in 2023/24 there were 90,700 applications, of which 53,100 were approved, translating to an approval rate of 58.5 per cent. This amounted to about $1.04 billion in superannuation savings being accessed, an increase of 36 per cent, or $278.7 million, from 2022/23.
The majority of these requests, nearly 80 per cent, were related to medical treatments and transportation, with a close to 70 per cent approval rate.
Other reasons cited for requesting a release of funds included preventing foreclosure or the forced sale of a home (14.2 per cent), covering funeral expenses for a dependant (3.6 per cent) and accommodating a disability (2.5 per cent).
Within the medical treatment category, dental (31,780 applications) and weight-loss treatments (17,320 requests) made up 54 per cent of all applications, with a combined approval rate of 75 per cent.
In real terms, these treatments resulted in $776.9 million being withdrawn from superannuation funds in 2023/24, marking a 27 per cent increase in applications from the previous year and a 97 per cent rise since 2018/19.
The SMSF Association has previously raised concerns about the use of superannuation for certain expenses under compassionate grounds, suggesting some instances may be “out of alignment with the policy intent of the compassionate early-release regime, which is based on the principle of last resort”.
“With detailed data from the ATO on the specific reasons for early-release applications, it is hard to avoid questioning whether some of these medical treatments would fall, at the very least, outside the spirit of the law relating to release,” SMSF Association head of technical Mary Simmons noted in an article published in issue 46 of selfmanagedsuper magazine.
“In the face of these numbers, perhaps the primary focus should be on reforming Medicare and the funding of our healthcare system to better support the provision of necessary treatments rather than shifting the financial burden onto individuals’ retirement savings.
“Nonetheless, while we wait for reform to our health system, we are left with no choice but to question the principles underpinning the release of superannuation on compassionate grounds to ensure we maintain the integrity of the super system.”
The ATO’s guidelines on compassionate grounds state funds will only be released for medical reasons if the treatment is necessary to address a life-threatening illness or injury, alleviate acute or chronic pain, or manage acute or chronic mental illness.
Applicants must also provide two medical reports, including one from a specialist, confirming the treatment is essential and unavailable through the public health system.
