Legislative Basis
The Superannuation Industry (Supervision) Act 1993 (SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (SIS Regs) set out when superannuation can be released early.
SIS Act, s 62(1)(b) – requires super to be preserved until a condition of release is met, unless an exception applies.
SIS Regs, regulation 6.19A – provides for early release of super on compassionate grounds.
The Australian Prudential Regulation Authority (APRA) is the body that approves applications for release on compassionate grounds.
What Counts as “Compassionate Grounds”
Under regulation 6.19A of the SIS Regulations, a person can apply for early release of super to pay for expenses where they have no other means of meeting the cost. The permitted categories are:
Medical treatment or medical transport
- For the person or a dependant.
- The treatment must be for a life-threatening illness or to alleviate acute or chronic pain or mental illness.
- Dental treatment can fall into this category where it meets the “acute or chronic pain” test and where it is not readily available through the public system.
Palliative care for a terminal medical condition
- For the member or a dependant.
Mortgage assistance
- To prevent foreclosure or sale of the member’s principal place of residence.
Disability aids or home/vehicle modification
- For severe disability suffered by the member or a dependant.
Funeral or burial expenses
- For a dependant.
Each of these grounds requires strict evidence, typically from registered medical or dental practitioners, and documentation showing the expense cannot otherwise be paid.
Who Decides?
APRA assesses and approves the application.
The superannuation fund trustee then makes the actual release, subject to its own rules.
APRA Prudential Practice Guide SPG 280 gives trustees practical guidance on how to administer early release provisions.
While there isn’t a dedicated Taxation Ruling on compassionate grounds, the ATO website outlines how early release interacts with tax treatment of benefits. Any amount released will usually be taxed as a normal super lump sum, depending on the member’s age and taxable component.
Important Points
The expense generally must be unpaid at the time of application.
The ATO will require supporting evidence such as invoices, quotes, medical reports, mortgage default notices, etc.
Compassionate release cannot be used for general living expenses, credit card debt, personal loans, or ordinary financial difficulties.
Key Points for Dental Treatment
Dental expenses can qualify only if supported by medical/dental evidence that the treatment is necessary to alleviate acute or chronic pain, or mental illness.
Cosmetic or elective procedures will not qualify.
Evidence from at least two medical practitioners (often including a specialist dentist or oral surgeon) is usually required.
Tax Treatment of Released Amounts
Any amount released on compassionate grounds is still a superannuation benefit under the Income Tax Assessment Act 1997 (ITAA 1997).
Tax is withheld at normal rates depending on age, tax-free/taxable components, and whether you are under or over preservation age.
Summary
Superannuation can be accessed early on “compassionate grounds” (SIS Reg 6.19A). Applications are made through APRA, supported by medical evidence, and approved amounts are taxed as normal super benefits.
Should you require further information regarding super release on compassionate grounds, please feel free to contact Peter Quinn by submitting an enquiry or by calling us on +61 2 9580 9166 to book an obligation-free appointment.
The information in this document does not take into account your personal objectives, financial situation, or needs, so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.