Over the last few years, there has been increasing publicity about individuals being able to access their superannuation funds early to pay for expensive dental treatments.
As we have been receiving some related phone enquiries, we would like to provide a balanced perspective to offer some clarity and hopefully help members of the public make informed decisions on this issue.
Background
In recent times, a new industry of companies has emerged, offering to help patients navigate the early superannuation funds release scheme and link them to dental practitioners – for a fee.
These companies often specifically promote expensive and complex dental treatments, including orthodontics, crowns and implants. This is despite the early release scheme supposedly being designed to only fund treatment for life-threatening illness or injury, or treatment for the alleviation of acute/chronic pain or mental illness.
Important facts to consider
Before proceeding with an early super fund release scheme application, it is important to be aware of the following:
- The ATO has clarified that cosmetic procedures, such as veneers performed for aesthetic reasons, would not qualify for early super release. ATO deputy commissioner Emma Rosenzweig said, “Applicants should be aware that submitting an application for health treatments that are not necessary to address life-threatening illness (etc, as above) would be making a false or misleading statement to the commissioner, which can attract severe penalties.”
- Such early withdrawals are taxed as a super lump sum. If you’re under 60, the taxable component is subject to your marginal tax rate, minus a 15% tax offset. This means that any applicant may pay an additional 22% tax on their lump sum withdrawal. However, for those over 60, the withdrawal is usually tax-free.
- The additional taxable income can push individuals into a higher tax bracket. This may trigger unintended financial consequences by reducing Centrelink payments such as:
- Family Tax Benefit
- Childcare Subsidy
- Income Support
- Parental leave pay.
- It may also change HECS/HELP repayment obligations.
The main message:
To be properly informed about the short- and long-term ramifications of an early superannuation withdrawal, patients/consumers should seek personalised advice from an independent financial advisor, rather than being guided by a dental practitioner or an early super withdrawal assistance company.
