Can you pay medical expenses with super?

Life can take an unexpected turn when members of an SMSF suddenly find themselves in need of medical treatment which they cannot afford with their personal savings. In these moments, it’s natural to wonder if early access to superannuation is possible to cover urgent medical treatment.

You can access super for medical bills, but only under strict conditions

Applications for early access to superannuation have to be made to the ATO under compassionate grounds for those needing funds to pay for the following:

• Medical treatment and medical transport
• Modifying a home or vehicle to accommodate a disability
• Palliative care
• Funeral expenses for a dependent
• Making a payment on a home loan or council rates to prevent losing their home

The focus of this article is on accessing superannuation early to pay for medical treatment. To be eligible, a member must prove they can’t cover medical expenses through personal savings, a loan or by selling assets.

They must also prove that the treatment is not available through the public health system.

In addition, at least one of the following medical conditions must apply:

• The associated medical condition is life-threatening (a medical condition likely to result in severe degeneration or death within 12 months)
• It leads to acute or chronic pain
• It leads to acute or chronic mental illness

Further requirements apply if the member needs access to their super for overseas treatment, IVF, dental treatment or for treatment that will occur in stages or over an extended period.

Find out about accessing super early on compassionate grounds, what you need to do and how to apply.

More importantly, for the ATO to assess the member’s application, these medical expenses must be unpaid. The ATO will not reimburse the member after they have paid these, even if they’ve borrowed from their family members or friends.

Lastly, the member has to be a permanent resident of Australia or New Zealand.

How to apply for ATO early release of super

Members can apply to the ATO online by providing two medical reports and a quote or unpaid invoice for the medical treatment. The medical reports need to be from either two registered medical specialists or one from a registered medical specialist and the other from a registered medical practitioner.

Once the evidence is compiled, the application must be submitted within six months from the date of the reports and quote/invoice—otherwise, new documents will need to be obtained.

Upon processing the member’s application, the ATO may contact the listed providers to ensure the information provided is accurate.

Tax Implications of Accessing Super for Medical Treatment

If their application is approved, the amount is treated as a lump sum and therefore, the usual tax rates apply, depending on their age, with the SMSF withholding the required amount of tax.

Final Considerations

Applying to access superannuation early for medical expenses requires careful planning. Members must meet the ATO’s strict eligibility criteria to avoid delays or rejections.

If your clients are facing significant medical bills and are considering compassionate release of superannuation, contact us to explore their options and ensure compliance with SMSF rules and tax obligations.