ATO, Superannuation

No compassionate release shortcut

SMSF accessing superannuation compassionate grounds ATO guidance

New guidance on accessing superannuation on compassionate grounds has been released by the ATO, which has noted SMSFs must still follow a specific process for early release.

The ATO has released updated guidance on accessing superannuation on compassionate grounds, noting SMSFs were not exempt from the requirement to contact the regulator before requesting access and to be aware of those promoting early access arrangements.

The guidance highlighted there were limited circumstances in which superannuation could be accessed on compassionate grounds to meet expenses for a fund member or their dependant and the ATO had no powers to vary conditions under which it was given.

The regulator stated the circumstances were limited to medical treatment and transport for a member or dependant, home or vehicle modifications to accommodate needs relating to severe disability, palliative care for terminal illness, death, funeral or burial expenses for a dependant and preventing foreclosure or the forced sale of a home.

It added members of Australian Prudential Regulation Authority-regulated funds and SMSFs had to follow the same process, which only differed for exempt public sector super schemes.

“Before applying to us for compassionate release of your super, you must contact your super fund to confirm they will release your super early on compassionate grounds and confirm there is sufficient money in your account to cover both the expense and the tax withholding amount,” it stated.

Additionally, superannuation fund members would also need to check if any fees apply for releasing super early under compassionate grounds and the impact on any insurance attached to a member’s accounts.

“If you have an SMSF, you still need our approval to access your super early under compassionate release of super,” the ATO said.

“Be aware that some advisers claim you can get early access to your super by transferring it into a SMSF. These schemes are illegal and there are heavy penalties if you participate.

“If you’re a member of an exempt public sector super scheme, do not apply to us unless your scheme has directed you to. In most cases, you’ll need to apply directly to your scheme for early release of super. These schemes are subject to state and territory laws on early release of super.”

It added any superannuation withdrawn on compassionate grounds would be paid and taxed as a normal super lump sum and would also count towards assessable income for income tax purposes and should be included in a personal tax return.

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