Treasury proposals for early release of super
Treasury’s draft proposals for the early release of superannuation include new grounds for release for financial hardship and victims of domestic violence but also tighten up a number of areas.
On 21 November 2018 Treasury released a paper with findings and draft proposals from its review into the rules governing the early release of superannuation benefits. Treasury is currently seeking views from interested stakeholders. This review was carried out in light of the four ‘guiding principles’ regarding the early release of superannuation identified by Treasury in a consultation paper released in December 2017. These are:
- Preservation: That superannuation benefits should be preserved for retirement.
- Hardship: That there will be circumstances in which the benefits to an individual in allowing them early access to their superannuation will exceed the benefits of preserving superannuation until retirement.
- Last resort: That early release of superannuation should generally be a last resort where other sources of support have been exhausted.
- Fair and effective: That the rules around early release should be clear and objective with decisions made in a timely and consistent manner.
Key draft proposals
In relation to early release relating to medical grounds (a type of compassionate ground), Treasury’s draft proposals include:
- Tightening up restrictions on release for overseas medical treatment so that release is only available in cases of a life-threatening illness or injury or where the individual currently resides outside of Australia, has done so for the past 12 months and does not intend to return to Australia to live in the next 12 months.
- Requiring that two registered medical practitioners must certify that the treatment is generally accepted in the medical profession as being a clinically relevant treatment option for the patient’s condition.
- That the specialist medical practitioner must be a specialist in the relevant field and that one of the medical practitioners must be the individual’s regular treating practitioner.
In relation to early release relating to other compassionate grounds, the draft proposals include:
- Introducing a new ground of release for victims of family and domestic violence.
- Limiting access under the mortgage foreclosure ground to a release once in a 24-month period (rather than the current 12 months) per person and including a requirement that the person’s mortgagee provides a statement that they believe the mortgage is serviceable by the person once the arrears have been rectified.
- Clarifying that release on severe disability grounds can include release for the purchase of disability aids or a specially modified vehicle.
- Remove the current ability for the Regulator to otherwise approve early release on grounds ‘consistent with’ other compassionate grounds.
In relation to early release relating to severe financial hardship grounds, the draft proposals include:
- Amending the Commonwealth income support payment test to a cumulative period of 26 weeks out of 40 weeks (rather than the current continuous 26 weeks requirement).
- Permitting multiple releases over a 24-month period, per person, up to the $10,000 cashing restriction.
Other notable issues
While Treasury considered creating a new ground of release for payment of rental arrears, it found that allowing early access to superannuation for this reason was not consistent with policy objectives. In coming to this decision Treasury recognised that an owned home is its own form of saving (and that mortgage foreclosure depreciates this) and that government assistance already exists for rental subsidies.
On 1 July 2018 the ATO took over from the Department of Health and Human Services as the office responsible for administering the early release of superannuation on compassionate grounds. Treasury has also recommended that the ATO take over the administration of early release based on severe financial hardship (currently administered by superannuation fund trustees). Treasury expects this will result in a greater consistency in application of the rules, reduce the burden on superannuation fund trustees, result in a better experience for applicants and allow a greater ability to keep data records which can be used to analyse trends and issues in the early release regime. Further to this, Treasury has proposed that a further review is undertaken five years after the changes are implemented using the key statistics collected by the ATO.
Overall the draft proposals appear to tighten up some evidentiary requirements relating to the current compassionate grounds of release, particularly medical grounds. The draft proposals also include the introduction of a new ground of release for victims of domestic violence while expanding the Commonwealth income support test for the severe financial hardship ground.