The ATO has recently seen a significant increase in calls from individuals who were encouraged by their super funds to contact the ATO because they were ineligible for compassionate release of super (CRS). However, in the majority of cases, the individuals concerned were ineligible because they were looking to use their super to pay for general expenses. It is important to note that CRS is only an option for the following expense types:
- medical treatment and transport costs;
- palliative care costs;
- a loan payment to prevent the loss of one’s home;
- costs of modifying a home or vehicle, or buying disability aids, needed because of a severe disability; or
- expenses associated with the death, funeral or burial of a dependant.
The expense must not yet have been paid (eg using a loan, a credit card or money borrowed from family or friends), and the amount of super a person can withdraw is limited to what they reasonably need. There are a range of eligibility conditions for each expense type, set out in detail on the ATO website. Any amounts released early on compassionate grounds are paid and taxed as normal super lump sums.
Source: www.ato.gov.au/Super/APRA-regulated-funds/In-detail/News/Five-grounds-for-compassionate-release-of-super/; www.ato.gov.au/Individuals/Super/In-detail/Withdrawing-and-using-your-super/Access-your-super-early/?page=2#Access_on_compassionate_grounds.