Early access to super rules should be “tighter and applied correctly”

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The SMSF Association has called for the rules around accessing superannuation early to pay for medical treatment to be “tighter and applied correctly”, in part so it can’t be used for elective surgery, while suggesting that some medical professionals may be over-promoting the option.

The Association notes the “significant” increase recently in accessing superannuation on medical grounds, 56% of which is for bariatric weight-loss surgery. CEO John Maroney said this strongly suggests the ‘genuine hardship’ threshold is not being met.

“There has to be an appropriate balance between the primary objective of superannuation – meeting people’s retirement income needs – and having early access to benefits because individuals have no financial capacity outside of superannuation to meet an expense incurred due to genuine hardship,” he said.

“It’s the Association’s belief that current use of superannuation for most medical treatments is not meeting this criterion.”

The SMSF Association says that rules around early access to super should be “tighter and applied correctly”, rather than including limits or safeguards.

“We believe that a tightening of the assessment of financial capacity should solve the problem regarding inappropriate access to superannuation on compassionate grounds,” Maroney said.

The Association, in its submission to the Government’s review of the early access rules, says it believes the increase in accessing super for medical treatment has been driven by greater public awareness of the option, “potentially exacerbated by medical professionals promoting early release of superannuation as a way to pay for surgeries”.

“We would have concerns that superannuation is being used for surgery that does not ‘need’ to be paid by superannuation. The provisions should be sufficiently tight to ensure that elective surgery is removed as an option for early release of superannuation. At the same time, greater analysis of financial capacity is necessary to ensure individuals are not accessing their superannuation when they have the financial capability to do so outside superannuation.”

The SMSFA says superannuation should only be released early for weight-loss surgery where a “doctor judges that the illness is life threatening”.

“We would hope there is no conflict of interest between a surgery legitimately being judged as necessary to treat a life threatening problem and surgeons making an individual aware that they can access their superannuation for an elective procedure for monetary gain.”

“We believe superannuation can be used to improve an individual’s life for serious conditions when they cannot source this money from other savings and assets.”

Though the SMSFA is supportive of extending the compassionate grounds for accessing super early, including for victims of domestic violence, to meet rental payments and as reparations for crime.

The SMSFA submission says it supports victims of domestic violence accessing their super under “strict and particular conditions”.

“There is genuine hardship in being stuck in a relationship of domestic violence that an individual cannot remove themselves from due to a lack of financial resources to do so. If the release of superannuation benefits allows them to be free from this situation then this should be utilised.”

The Association also supports victims of crime being able to access perpetrator’s superannuation.

“When an individual commits a serious crime they should not be able to hide behind legislation that protects their superannuation. We believe if an individual has committed a serious crime against a victim they have sacrificed their rights to full protection of their superannuation and their victim becomes the priority.”

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