Early super release rules being reviewed

The Australian government is reviewing the rules surrounding the early release of superannuation, and seeking consultation from the public on when super should be claimed.

While superannuation is intended to be held until Australians reach their preservation age and leave the workforce, in order to support their lifestyle in retirement, there are currently exceptions to this rule in place where Australians can claim these savings ahead of time.

According to the consultation paper, the rules governing early release of superannuation benefits have not changed substantially since 1997, and several key questions have arisen around whether these rules remain fit for purpose, including:

• the rapid increase in the use of superannuation for medical treatment;
• whether the mortgage foreclosure ground should be extended to rental eviction;
• whether the current rules for release on grounds of severe financial hardship appropriately balance the need for simplicity and consistency with fairness; and
• whether an offender’s superannuation should be available to pay compensation or restitution to victims of crime.

Superannuation for medical purposes

Applications for the early release of superannuation to cover medical costs were found to have grown significantly since 2000, with a notable acceleration following the introduction of an online application process by the department of Human Services (DHS) in July 2015. Applications approved on medical grounds were found to have increased around five-fold since 2010-11, from around 2500 in 2010-11 to around 15,000 in 2016-17.

The consultation hopes to determine whether this rapid increase in early super release on medical grounds suggests the current rules are too lenient and that the wording of the current regulations is too broad. Some stakeholders consider the current rules to be sufficient, but also consider that the administration of early release provisions could be tightened and the regulations read more strictly.

Superannuation for housing

According to the consultation paper, superannuation benefits may currently be released early on compassionate grounds if these funds are required to make an outstanding payment on a loan, and/or to prevent foreclosure of a mortgage on a home. The maximum amount that can be released within a 12 month period is the equivalent of three months’ repayments and 12 months’ interest on the loan’s outstanding balance.

While this offers some security to Australian homeowners, some stakeholders have raised concerns that similar provisions aren’t available to Australian renters, who could also find themselves homeless if extreme financial hardship leaves them unable to pay for their housing, such as when their rent is in arrears.

Superannuation for crime compensation

A potential new addition to the superannuation early release rules is to allow the victim of a crime to recover unpaid compensation or restitution from a perpetrator’s superannuation.

Each State and Territory currently has its own statutory victims of crime compensation scheme. However, victims of crime generally cannot access the superannuation of a perpetrator where they are owed a payment as a result of a court proceeding, even when the perpetrator has little or no assets outside of superannuation. This special protection of superannuation balances reflects the importance of preserving a person’s private retirement income.

The consultation seeks to determine whether victims of crime should be able to access a perpetrator’s superannuation, and the circumstances under which they’d be able to claim it, e.g. for victims of all crimes or for victims of violent crimes only.

The Treasury will be open to responses from the public until 12 February 2018, and the review is set to make recommendations to the Government in March 2018.

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