Australians Withdraw Over $1.4 Billion from Superannuation for Compassionate Reasons Amid Misuse Concerns

Significant Superannuation Withdrawals Recorded

In the 2024/25 financial year, Australians withdrew more than $1.4 billion from their superannuation accounts under compassionate release provisions. This figure represents a substantial increase in early access to retirement savings, with a significant portion allocated to medical treatments. The Australian Taxation Office (ATO) reported receiving 112,400 applications for compassionate release in this period, with 67,900 approvals.

Medical treatment, including dental work, IVF procedures, and weight loss treatments, accounted for over 83 percent of these requests. Notably, applications for dental services alone have more than doubled in the past two years.

Understanding Compassionate Release Grounds

The early release of superannuation on compassionate grounds is permitted under strict conditions, managed by the ATO. These conditions are designed to provide a safety net for individuals facing severe financial hardship due to specific circumstances. Eligible grounds for withdrawal include:

• Medical treatment or transport for the applicant or a dependant, particularly for life-threatening illness or injury, acute or chronic pain, or acute or chronic mental illness.
• Palliative care for a terminal illness affecting the applicant or a dependant.
• Modifications to a home or vehicle to accommodate a severe disability for the applicant or a dependant.
• Payment of funeral or burial expenses for a dependant.
• Preventing the foreclosure or forced sale of the applicant's main residence.

It is a critical requirement that the expenses are unpaid and that the applicant cannot afford to pay them without accessing their superannuation, positioning it as a 'last resort' option.

Regulatory Concerns Over Misuse and Inappropriate Practices

The significant increase in withdrawals has raised concerns among regulators regarding potential misuse and inappropriate practices. The ATO and the Australian Health Practitioner Regulation Agency (Ahpra) have issued joint warnings to health practitioners and registered agents.

ATO Deputy Commissioner Emma Rosenzweig stated that the ATO is 'concerned that some health practitioners and registered agents are inappropriately supporting individuals to access their superannuation on compassionate grounds, particularly for cosmetic procedures that aren't aligned to compassionate release requirements.' She emphasized that 'compassionate release of super should only be considered as a last resort, where all other options of paying for the eligible expenses have been exhausted.'

Ahpra Chief Executive Officer Justin Untersteiner highlighted 'deeply concerning' reports of financial harms and warned against practitioners prioritizing 'their own financial gain ahead their patients' best interests.' Regulators are actively working to 'stamp out business models and inappropriate practices' that encourage the use of superannuation for 'overly expensive or unnecessary medical treatments.' New guidance has been released by Ahpra and the Dental and Medical Boards of Australia for doctors and dentists, stressing the importance of thorough, health-focused assessments.

Impact on Retirement Savings

While compassionate release serves as an important safety net, early withdrawals can have significant long-term financial impacts on an individual's retirement savings. The superannuation system is designed to provide financial security in retirement, and accessing funds prematurely can reduce future retirement balances.