On 21.11.18, the Assistant Treasurer announced the release of a further consultation paper on changes to the early release rules for superannuation. (This follows Minister O’Dwyer’s announcement in Dec 2017; a consultation paper issued on 184.108.40.206; a victims of crime consultation paper issued on 28 May 2018; and Minister O’Dwyer’s Nov 2018 announcement relating to victims of family or domestic abuse.)
This paper seeks stakeholder views on five proposed changes that would relax aspects of the current regime and provide more scope for individuals to obtain early release of their superannuation.
- A new compassionate ground of release should be introduced 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. This would supplement existing government and non-government schemes and assist individuals who have experienced family and domestic violence to get back on their feet and begin the process of recovery.
- Compassionate grounds should be extended to include explicit reference to dental treatment being permissible for treatment of a life threatening condition, or acute and chronic pain. This should be subject to broadly equivalent safeguards and evidentiary requirements that apply to other medical treatment, to the extent possible. This will help ensure that dental conditions are treated in the same way as other medical conditions.
- Compassionate grounds should also be extended to explicitly permit early access to superannuation for the purchase of disability aids and modified vehicles 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.
- The definition of severe financial hardship should 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 definition of a qualifying income support payment should not change.
- Multiple releases should be permitted on severe financial hardship and family and domestic violence grounds (from $1,000 up to the cap of $10,000 in a 24-month period) so that applicants are not incentivised to withdraw the maximum amount at once.
This paper also seeks stakeholder views on a further eight proposed changes to strengthen the integrity of the current arrangements and ensure that superannuation is accessed as a last resort in cases of hardship.
- The eligibility criterion for release on mental health grounds should be tightened 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.
- Early access for overseas medical treatment should only be available for a life threatening illness or injury, or where a person resides overseas. This change is intended to maintain the integrity of release for medical treatment.
- Upon application for early release, the Regulator should provide information to individuals of alternative support that may be available, relevant to the specific compassionate ground for which the individual is applying. This will provide an additional prompt for individuals to consider access to superannuation to be a last resort.
- Two medical practitioners must certify that the treatment for which early release is being obtained is generally accepted by the medical profession as being ‘clinically relevant’ for the patient’s diagnosed condition. This requirement is intended to provide an additional prompt for practitioners during their clinical decision making.
- 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 (rather than a specialist in any field) and one of the two required medical practitioners must have an existing relationship with the applicant. This change is intended to ensure the integrity of the certification process.
- Early release under the mortgage foreclosure ground should only be permitted once every 24 months (rather than annually). 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. 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. No changes are proposed to the requirement that a person must be listed on the mortgage title.
- The proposed new family and domestic violence ground for early release should also be subject to a cap of $10,000 per applicant each 24 months as well as a requirement for judicial evidence or two pieces of specific non-judicial evidence. This proposed evidentiary requirement is based on existing requirements of immigration provisions governing visas for individuals suffering family and domestic violence.
- The current catch-all provision that allows release on grounds ‘consistent with’ the rules should be repealed. This provision is not necessary if the explicit grounds are extended to include dental treatment and disability aids.
CPD questions (answers available)
- Does the paper seek feedback on victims of family and domestic violence having early access to their own superannuation, up to $10,000 per 24 months?
- Might early release be available for dental treatment and disability aids?
- That the hardship ground of 26 consecutive weeks of qualifying Commonwealth income support, be relaxed to 26 weeks out of any 40 weeks?