Aussies raid billions in super to access medical treatment

Latest ATO data reveals a whopping $2.59 billion has been taken out of superannuation accounts early.

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More than 142,000 Australians have funded medical and dental treatment with superannuation savings in the past five years, data from the Australian Taxation Office reveals. 

The $2.59 billion worth of health-related withdrawals accounted for almost all of the $2.79 billion taken out of superannuation accounts between 2018-2019 and 2023-2023, the report showed. 

The numbers have been steadily rising over the past five years. In 2018-2019 the ATO approved the release of $389.1 million for medical purposes (including medical treatment and transport), to 22,700 individuals. Another 2800 individuals had their requests denied. 

In 2022-2023 that number rose to $730.5 million, with 37,400 of the 44,900 individuals who applied for early super release for medical purposes successful. 

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The figures have prompted Private Healthcare Australia to call on the federal government to tighten the rules for early access to superannuation so people can only use it for terminal and life-threatening conditions. 

It said allowing tens of thousands of people to drain their superannuation for medical and dental treatment each year was driving up costs for all consumers and should be stopped. 

PHA CEO Dr Rachel David said the trend was lining the pockets of some doctors and dentists, and unscrupulous agencies that assist people to access their super for nose jobs, tummy tucks, weight loss surgery, IVF, and expensive dental implants, among other services. 

Since the pandemic began, there has been a 71% jump in people applying for early release on compassionate grounds, and a 67% increase in payments made. The super funds most affected are those covering miners, builders and transport workers. 

“This is robbing people of their retirement savings and it is driving up the cost of healthcare for all Australians,” Dr David said. 

“When people access big lump sums of money like this, surgeons and dentists think they can charge more. That’s exactly what’s happened over the past five years. We’ve seen the cost of some procedures skyrocket in line with the release of this money. 

“We know an increasing number of people can’t afford to go to the dentist or see a medical specialist. 

“We need to address why this is the case, rather than creating another problem for the future. When a 40-year-old takes $20,000 out of their superannuation, they will be at least $100,000 poorer in retirement.” 

The ATO took over administration of early release of super on compassionate grounds on 1 July 2018 and has strict conditions, including the requirement that an individual has no other means to pay the expenses. 

The five main grounds of eligibility are: 

• medical treatment or transport for you or your dependant 

• accommodating a disability for you or your dependant 

• palliative care for a terminal illness for you or your dependant 

• funeral expenses for your dependant 

• preventing foreclosure or forced sale of your home. 

To apply for compassionate release of super for medical treatment, the law states it must be necessary to treat a life-threatening illness or injury; alleviate acute or chronic pain; or alleviate acute or chronic mental illness. 

Dental care and weight loss account for the lion’s share of funds accessed for medical treatment. In 2022-2023, $313.4 million was approved for dental treatment, $248.9 million for weight loss and $47.9 million for IVF. The remaining $118.1 million falls into the “other” category and includes “all other types of treatment recommended by a medical practitioner”.  

PHA data from people using their health insurance in the private hospital system showed the out-of-pocket cost of a tummy tuck after major weight loss and nose surgery for medically necessary reasons has surged 80% and 72% respectively over the past four years in line with this trend. Over the same period, the out-of-pocket costs for non-cosmetic removal of breast implants has risen 89%. This far exceeds the 14% increase in health inflation over the past four years. 

Dr David said PHA wanted to see downward pressure placed on medical and dental costs, and this would require all medical specialists’ fees to be added to the Government’s Medical Cost Finder website under an opt-out system (it is currently voluntary for doctors to add their fees); an independent website for dentists’ fees so consumers can shop around; and mandatory price displays for individual dental clinics, with fees for common services published on their websites and windows. 

PHA also recommended the federal government tightened rules for early access to superannuation for medical treatment by restricting it to terminal and life-threatening conditions. Until this can be achieved the Government should: 

• Require more than one quote for the cost of treatment before access is granted. 

• Insist a patient receives a second independent medical opinion from someone other than the treating practitioner and the patient’s general practitioner. 

• Ensure health professionals are not providing financial advice to their own patients, including distributing materials promoting early access to super in their rooms or online. 

• Only allow release of funds based on reasonable fees which can be judged by Medicare benefits and private health insurance rebates. 

• Ensure informed financial consent includes explaining the lost value of funds at retirement age. 

Patricia Sparrow, CEO of the advocacy organisation for older people, COTA Australia, said the trend was a real cause for concern. 

“We need to address the fact that people aren’t able to afford things like dental care rather than forcing people to dig into their superannuation and creating another problem down the track,” she said.  

“When you take the compounding impact into consideration, a $20,000 withdrawal at 40 years of age could mean around $100,000 less at retirement. That’s a huge impact that needs to be properly considered. 

“It’s shocking to think that so many Australians are in a situation where they must choose between accessing essential medical care and sacrificing a dignified retirement. 

Ms Sparrow said the federal government should be taking steps to legislate the purpose of superannuation. 

“Our superannuation system is designed to ensure Australians can retire with dignity,” she said. 

“The government has a role to play in ensuring people are completely aware of the impact of accessing their superannuation early. 

“It is undoubtedly our most vulnerable Australians who are being forced to access their superannuation to pay for basic healthcare – the people who need a healthy super balance more than most.  

“This is an issue that needs to be addressed quickly or we risk ending up with a generation of people who have worked hard all their life but don’t have the super balances to show for it.”