When can you (really) withdraw funds from super? 

Some social media users may have noticed a surge of advertising telling them that they can withdraw funds early from superannuation to pay for expensive medical and dental treatments.

There is one problem – in many cases this advice is flawed. It is true that more Australians are raiding their super, with Australian Taxation Office data revealing that 63,300 people were approved to withdraw a combined $1.37 billion from their superannuation for medical costs last financial year.

However, the ATO, the Australian Health Practitioner Regulation Agency and the Dental Board of Australia have warned doctors, dentists and patients alike that there are strict rules around the early release of super funds. They are worried that some businesses are inappropriately urging patients to access their super for unnecessary cosmetic procedures.

People can apply, under the compassionate grounds scheme, to take money out of their retirement funds to meet certain medical, palliative care, disability, death and home foreclosure expenses. However, the ATO manages that application process and all associated rules.

There is also a wider concern that older Australians may potentially be depleting their retirement pool – and minimising the impact of compound interest – by using super to pay for medical treatments, investments and even holidays.   

Broadly speaking, anyone can access their super when they turn 65, regardless of whether that are still working or not.

From age 60, if you are retired or leave a job, you can also get your super, while another option is to open a Transition to Retirement (TTR) account to access some of your funds while you are still working. Setting up such an account may allow you to supplement your income if you cut your work hours, but the rules can be complicated. Contact your super fund or financial adviser for advice.

• in times of financial hardship, such as preventing foreclosure of a home
• because of a terminal medical condition
• for palliative care, or funeral expenses
• if you are a temporary resident who is leaving the country.

Some other rare approvals may be granted. For example, under the First Home Super Saver Scheme, investors may be able to withdraw voluntary contributions they have made to super to help save for their first home. If your super balance is very small and your employment has been terminated, there are also some provisions for the early release of funds. Funds are usually paid as a lump sum.

Such cases require ATO approval and typically involve filling out lots of paperwork. Any early access to super will usually be treated as a last resort when other options of paying for expenses have been exhausted.

To apply, contact the ATO. Your super fund can also provide broad advice on the rules.

The main reason that the ATO and superannuation funds are reluctant to support the early release of super stems from the original idea for setting up the Superannuation Guarantee in Australia in the early 1990s.

The system is designed to ensure that retirees have sufficient finances to lead a healthy and happy post-work life.

As a result, the ATO and financial advisers caution investors to carefully consider the long-term implications of draining your super pool for inappropriate reasons. Australians who invest in super have long gained from the magic of compound interest – and any actions that dilute such benefits should not be taken lightly.

Contact your financial adviser before making any potentially life-changing money decisions.

To find out more about your superannuation options, speak to a Mercer Financial Adviser.