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Aus Gov't Reviewing Rules For Early Release Of Super

by Mary Swire, Tax-News.com, Hong Kong

08 December 2017


The Australian Treasury is to review the rules governing the early release of superannuation on the grounds of severe financial hardship and compassionate grounds.

Revenue Minister Kelly O'Dwyer said that the rules have not changed substantially since 1997. She explained: "The superannuation system has come a long way since then. It is time to review the current arrangements as they relate to severe financial hardship and compassionate grounds to ensure they remain fit for purpose."

The review will also consider whether, and the circumstances in which, superannuation assets should be available to pay compensation or restitution to victims of crime.

The review will make recommendations to the Government in early 2018.

Normally, superannuation funds cannot be used until an individual reaches "preservation age" and retires. Preservation age depends on when an individual was born.

However, in certain circumstances, access may be granted to funds on compassionate grounds, including for the payment of medical treatment, payment on a loan to prevent an individual from losing their home, or for the payment of expenses associated with a death, funeral, or burial.

The amount of superannuation that can be withdrawn on compassionate grounds is limited to what is reasonably needed. It is paid and taxed as a normal super lump sum.

A super withdrawal due to severe financial hardship is paid and taxed as a normal super lump sum. Access on the basis of a terminal medical condition must be paid as a lump sum and is tax-free if it is withdrawn within 24 months of the date of certification. In the case of permanent incapacity, at least two medical practitioners must certify the condition for the individual to receive concessional tax treatment.

The Government will transfer the regulatory role of administering the early release of superannuation benefits on compassionate grounds from the Department of Human Services to the Australian Taxation Office (ATO). The aim is to enable the ATO to provide a more streamlined service to superannuation members.

The Government will allow the ATO to notify a superannuation fund when it has authorized early release on compassionate grounds.

"This change recognizes the existing strong relationship between the ATO and the superannuation industry and reduce the need for manual, paper-based processes – expediting the release of funds to successful applicants."

TAGS: tax | investment | retirement | Australia | tax authority

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