The Government is considering changing the rules around early release of superannuation on medical grounds, which has been rapidly increasing in recent years.
Minister for Revenue and Financial Services Kelly O’Dwyer has launched a review of the rules around the early release of superannuation. Minister O’Dwyer says, in the consultation paper, that stakeholders have raised with her the “the rapid increase in the use of superannuation for medical treatment”, among other issues.
The paper says that the total amount of superannuation released early on compassionate grounds has increased from around $42 million in 2000/01 to around $290 million in 2016/17. Though it is also noted that this is just over 0.01% of the total assets in superannuation.
“Of course, we want to make sure that people get access to their money where it is appropriate but that we strike the right balance, that we make sure we are protecting people’s retirement incomes. Because at the end of the day, that’s money that they are going to need when they do retire,” said Minister O’Dwyer.
In 2016/17 72% of the superannuation approved for compassionate release was for medical treatment and transport and 18% was for mortgage payments. Early release of superannuation for medical treatment was also the fastest growing segment of compassionate grounds – increasing almost five-fold compared to all other reasons.
According to Minister O’Dwyer the Treasury, Department of Human Services and of Health are currently working to better understand trends and practices in the early release of superannuation for medical purposes.
One driver identified by Treasury is the growth in the number of applications for early release on medical grounds, which increased from around 4,000 in 2010/11 to around 22,000 in 2016/17. Over the same period the average amount approved for release on medical grounds increased from around $9,000 to around $14,000.
“It can be argued that the rapid increase in the early release of superannuation on medical grounds suggests the current rules are too lenient and that the wording of the current regulations is too broad. Conversely, other stakeholders consider that the current rules are sufficient but that the administration of the early release provisions could be tightened and the regulations read more strictly,” says the paper.
Other grounds for early release of superannuation are considered as part of the review, including severe financial hardship, for a mortgage, to modify a home or vehicle or severe disability grounds.
The review also asks if new grounds for early release of superannuation should be added to the legislation, including for victims of domestic violence and if victims of crime should be able to access the super of perpetrators.
The review is scheduled to make recommendations to Government in March 2018. Submissions to the review are due by 12 February 2018.