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Early release of superannuation on compassionate grounds: ATO

From 1 July 2018, responsibility for the administration of the early release of superannuation benefits on compassionate grounds will be transferred from the Department of Human Services (DHS) to the ATO.

Since the ATO is responsible for most of an individual’s interactions with the superannuation system, this change will enable the ATO to build on these existing relationships and provide a more streamlined service to superannuation fund members.

A key improvement under the new process is the ATO providing electronic copies of approval letters to superannuation funds at the same time as to the applicant, which will mitigate fraud risk and negate the need for superannuation funds to independently verify the letter with the Regulator.

Individuals will also upload accompanying documentation simultaneously with their application, rather than the current ‘two-step process’.

Since DHS will accept early release applications up until 30 June 2018, there will be a short transition period where DHS will continue to process those existing applications and complete any necessary reviews.

Nonetheless, from 1 July 2018 the ATO will process all new applications.

Compassionate grounds include:

  • medical treatment and medical transport for you or a dependant
  • palliative care for you or a dependant
  • making a payment on a loan or council rates so you don’t lose your home
  • modifying your home or vehicle, or buying disability aids for you or a dependant because of a severe disability
  • expenses associated with a death, funeral or burial for a dependant.

The amount of super you can withdraw is limited to what you reasonably need. It is paid and taxed as a normal super lump sum. If you are under 60 years old, this is generally taxed between 17% and 22%. If you are over 60 years old, you will not be taxed.

Note: Your fund will automatically deduct the tax from your super account – the amount you receive from the release will not be affected.

Eligibility for compassionate release of superannuation

ATO can only release your superannuation on compassionate grounds if you:

  • meet the eligibility requirements of the compassionate ground you’re applying for
  • have not paid for the expense – ATO can only approve compassionate release of superannuation to help you with unpaid expenses. If you have already paid the expense using a loan, a credit card or money borrowed from family or friends, you do not meet the eligibility requirements.
  • can’t afford to pay the expenses without accessing your super e.g. by obtaining a loan or using your savings
  • are a citizen or permanent resident of Australia or New Zealand
  • provide all required supporting evidence and invoices/quotes.

There is a lot to consider which is why we recommend to discuss this with your financial planner or accountant.

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