Early release rules set for shakeup with new consultation
The government has released a second round of consultation on the early release of superannuation benefits, which will relax some aspects of the early release scheme while tightening others.
In December last year, former Minister for Revenue and Financial Services Kelly O’Dwyer announced that Treasury would review the rules governing the early release of superannuation benefits on the grounds of severe financial hardship and as compensation to victims of crime.
While the issue of whether superannuation should be available to pay compensation to victims of crime is now being handled through a separate process, the government has released a second round of consultation examining what aspects of the early release scheme should be relaxed and what should be tightened.
As part of the second round of consultation, the government has released an issues paper with findings from the 60 submissions and 10 roundtables it held during the previous round of consultation and proposals for new reforms. You can access the issues paper here.
The paper is seeking stakeholder views on proposed changes for relaxing aspects of the current regime and providing more scope for individuals to obtain early release of their superannuation.
One of the proposals is to allow victims of family and domestic violence to gain early access to their superannuation up to a total cap of $10,000 over a 24-month period.
The paper also proposes extending compassionate grounds so that it includes an explicit reference to dental treatment being permissible for treatment of a life-threatening condition or acute and chronic pain.
“This will help ensure that dental conditions are treated in the same way as other medical conditions,” the paper said.
It also suggests extending compassionate grounds so that it explicitly permits access to superannuation for the purchase of disability aids and modified vehicles.
This would be on the basis of certification from a medical practitioner that the aid or vehicle is necessary to accommodate the special needs of the individual or a dependant arising from a severe disability, it explained.
It also said that the definition of severe hardship could be relaxed so that individuals would be eligible for early release if they have been receiving qualifying Commonwealth income support payments for 26 cumulative weeks out of 40 weeks, rather than 26 consecutive weeks, and meet the living expenses test.
The paper has also made proposals for tightening the ways in which superannuation is accessed so that it is only accessed as a last resort in cases of hardship.
One of the proposals is to tighten eligibility for release on mental health grounds by replacing “alleviate an acute or chronic mental disturbance” with “treat a diagnosed mental illness or behavioural disorder”.
“This will ensure consistency with medical terminology and provide a higher but appropriate threshold for release,” the paper said.
It also said that early access for overseas medical treatment should only be available for a life-threatening illness or injury, or where a person resides overseas.
It has also proposed a new requirement, which will mean that two medical practitioners must certify that a treatment is generally accepted by the medical profession as being “clinically relevant” for the patient’s diagnosed condition, before superannuation benefits are released.
“To secure early release on medical grounds, applicants should be required to obtain certification from a specialist in the field relating to the individual’s injury or illness, and one of the two required medical practitioners must have an existing relationship with the applicant,” it said.
It has also proposed tightening early release on the grounds of mortgage foreclosure by only permitting early access once every 24 months.
“In addition, the current evidentiary requirements should be extended so that the lender must certify that the individual should be able to meet their repayments in the future once the arrears are cleared,” it said.
“These changes are to ensure superannuation is only released to address short-term financial hardship rather than facilitating an ongoing incapacity to finance the mortgage.”
It has also proposed repealing the catch-all provision that allows release on grounds “consistent with” the rules.
“This provision is not necessary if the explicit grounds are extended to include dental treatment and disability aids,” it said.
Interested parties can submit responses up until 15 February 2019.