ATO Deputy Commissioner Emma Rosenzweig said there are severe penalties for Aussies trying to get around the rules of early super access. (Source: ATO/Getty)
The Australian Taxation Office (ATO) is warning Aussies about the risks of withdrawing their superannuation early. There are some exceptional circumstances where you’re allowed to dip into your nest egg before you hit retirement, and the tax office said some are trying to get around the rules.
You’re meant to build up your superannuation over your working life to give you enough cash to survive your twilight years. ATO Deputy Commissioner Emma Rosenzweig said pulling out money early should be seen as a “last resort” after all other avenues have been exhausted.
“We have seen an increase in dodgy advice and misconceptions around when individuals can access their super early, and we want to make it clear that Australians should not be considering early access unless they are eligible and it is absolutely necessary for their circumstances,” she said.
You can finally tap into your retirement nest egg when you finish work completely or reach preservation age, which is 55 to 60, depending on when you were born.
You can also access your super after 65, even if you’re still working.
If you don’t fulfil any of those criteria, you can access your money if you need:
Medical treatment for you or your dependent
Medical transport for you or your dependant
To modify your home or vehicle to accommodate special needs arising from your or your dependant’s severe disability
Palliative care for you or your dependent’s terminal illness
Death, funeral or burial expenses for your dependant
To prevent foreclosure or forced sale of your home
More than $1 billion in compassionate superannuation withdrawals were actioned last year alone by at least 50,000 people.
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The tax office said Aussies have been trying to get around these rules and have also been given incorrect information from health professionals.
A dentist advised a patient that they could dip into their super to pay for cosmetic veneers, which does not fall under compassionate grounds.
Some medical professionals have even been preparing “inaccurate” medical reports to get their patients over the line, while others have been encouraging people to access their super to pay for health and other cosmetic treatments, despite not having a financial services license.
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“When preparing medical reports to support an application, health practitioners must ensure they perform their role ethically and to the expected standard, whilst ensuring they don’t provide services they aren’t competent to provide or trained for,” Rosenzweig said.
The ATO has warned that only under exceptional circumstances can you access your superannuation early. (Source: Getty) · Jenny Dettrick via Getty Images
“We are working with other regulators, including the Australian Health Practitioner Regulation Agency (AHPRA), to address any inappropriate behaviour.”
The ATO warned there can be “severe penalties” for making false or misleading statements, and that applications for early access of super on compassionate grounds must only be completed by the person seeking the release.
Aussies have also been warned that they can’t access their super for holidays or day-to-day expenses, even if they’re running low on cash.
New Finder research revealed 10 per cent of people would put their super towards easing cost-of-living pressures, 8 per cent would use it to pay down their mortgage, while the same amount would spend it on a holiday.
“It is not ‘free money’, and it will reduce the amount available in retirement and results in you paying more tax,” Rosenzweig said.
When money goes into your super account, it gets taxed at 15 per cent.
However, if you access your retirement savings on compassionate grounds, it’s taxed on the way out, but this time as a normal super lump sum.
This means it will usually get hit with whatever is lower out of your marginal tax rate or 22 per cent.
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