The Minister for Financial Services is inviting advisers’ views on whether current early-release rules effectively balance the need to preserve superannuation for retirement with making it available in limited cases of genuine hardship.
In a consultation paper published in late December, Minister Kelly O’Dwyer revealed the research behind Treasury’s decision to launch the review into the early release of super.
The research found disproportionate numbers of applications for funds to be released on medical grounds, which have increased from about 4000 in 2010-11 to 22,000 in 2016-17, with approvals increasing from 2,500 to 15,000 in that time. The average amount released has increased by about 50 per cent (from $9,000 to $14,000) over that period and the paper notes that medical reasons now account for 72 per cent of total assets released under compassionate grounds.
In questioning the reason for these increases, the paper reports that many recent applications relate to “out of pocket expenses associated with bariatric surgery (that is, weight-loss surgery), with a smaller proportion attributable to assisted reproductive treatment (ART), also referred to as in‑vitro fertilisation (IVF) treatment”. While the paper asks whether this indicates too much clemency in these areas, it also identifies other areas, such as dental care, where the current rules do not explicitly provide for early access.
“It can be argued that the rapid increase in the early release of superannuation on medical grounds suggests the current rules are too lenient and that the wording of the current regulations is too broad,” the paper states. “Conversely, other stakeholders consider that the current rules are sufficient but that the administration of the early release provisions could be tightened and the regulations read more strictly.”
Victims of domestic violence, other crimes
Another focus of the review is potential early release of funds for victims of domestic violence. Whilst the current compassionate grounds do not accommodate such victims, the paper notes that “it is an open question whether early release for victims of domestic violence should be considered as a ‘last resort’ where other forms of assistance have been inadequate”.
HESTA Super has been a vocal advocate for victims of family violence to be considered in the review, and has made public its proposal for them to be able to access up to $10,000 of their super as a last resort.
“We think it’s entirely appropriate super regulations extend compassion to victims and survivors of family violence to empower women with the financial means to escape abusive relationships,” HESTA chief executive Debby Blakey stated in a media release last year. “Women already retire with half the super of men, and they shouldn’t have to use their super for this purpose. But family violence is one of those rare situations in which short-term financial needs are more compelling than the need to preserve superannuation for retirement.”
HESTA has also voiced support for the paper’s other new proposal, which seeks to give victims of crime the ability to seek compensation or restitution from the perpetrator’s superannuation.
“A holistic view of rules around the early release of super should consider the immediate needs of the victim or survivor, as well as the ability to recover monies via a claim on the super of the perpetrator,” HESTA stated.
The proposal to make criminals’ superannuation available would “represent a departure from the existing retirement income framework,” the paper states. It goes on to outline 10 specific issues the proposal raises, including whether it should be available only for particular offences, and whether a criminal conviction should be required. Other issues the paper raises include how to deal with any overlap with family law, and whether state/territory compensation bodies should be able to recover their costs from a perpetrator’s superannuation.
New administrator
As expected, the paper also confirms that the administration of the early release of superannuation on compassionate grounds will change hands from the Department of Human Services to the Australian Tax Office this year. The responsibility previously shifted from the Insurance and Superannuation Commission to the Australian Prudential Regulation Authority in 1998, before being passed to DHS in 2011.
Treasury is inviting interested parties and stakeholders to comment on the consultation paper on its website. Enquiries can be made via email at: superannuation@treasury.gov.au. The closing date for submissions is February 12.
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