Using Super for Medical Procedures

This blog article is in response to the 1 October 2014 story published by The Age newspaper, highlighting the public concerns of a taxpayer withdrawing $30,000 from her superannuation fund in order to pay for weight loss, a tummy tuck, and breast implants. There was general public concern over this issue regarding the grounds with which superannuation funds can be used prior to retirement. The story can be found at


The article listed above outlined the circumstances in which a member of a large superannuation fund obtained approval to withdraw from their superannuation fund to pay for a stomach reduction procedure.

The tax payer involved suffered from obesity and had family history of diabetes, cancer and hypertension. On this basis, she obtained written advice from her medical practitioner who argued that without the stomach reduction surgery, it was likely that she would experience severe medical problems which may lead to life threatening complications.

Applications for early release of superannuation on medical grounds must first be approved by the Department of Human Services (DHS). In order for these applications to be considered and approved, the tax payer must supply letters from their general practitioner (GP) and a specialist certifying that their condition is life threatening, and also provide evidence that the expenses of this procedure cannot be met by other financial needs including savings.

Within two weeks of lodging her early release application, the taxpayer was allowed $10,000 to be released, and nine months after the surgery was conducted, she had lost 81 kg.

In a general sense, a tax payer may be eligible to withdraw their superannuation entitlements on compassionate grounds as stipulated on item 7 f schedule 1 of the Superannuation Industry (Supervision) Regulations 1994. For a compassionate grounds early release, the amount being withdrawn is to fund the medical treatment of the tax payer or their spouse.

Again, medical documentation is required for the application of early release from a superannuation fund by the DHS.

In this instance, the taxpayer argued that her obesity was a medical condition, and the stomach reduction surgery was an appropriate medical treatment to alleviate this condition. Her request to the DHS was approved and so the trustee of the superannuation fund made the money available.


In the same article, the same tax payer made a second withdrawal after her stomach reduction surgery. This time, she withdrew the remainder of her fund, $20,000, to fund breast implants and a tummy tuck.

“Well worth emptying the pot for, particularly given the decades she has remaining in the workforce to rebuild her retirement savings, the taxpayer says: ‘I could have died in five years and now at least I’ve used the money and I’ve extended my life. It was worth it.”

It has been the concern of many that trustees of SMSFs may become aware of this taxpayer’s situation and believe that they are entitled to a condition of release for cosmetic purposes such as a tummy tuck and breast implants as well.

As a result of this concern, the ATO contacted the authors of the article and had them provide further clarity on the conditions with which superannuation funds can be released on compassionate grounds, i.e. to pay for medical procedures.

Why is this important?

There was a general concern within the taxation industry that tax practitioners would advise clients who run their own SMSFs that, on the basis of this article, are entitled to withdraw money from their superannuation fund to pay for cosmetic surgery such as breast implants and a tummy tuck.

It is important for tax practitioners and their clients to be aware of the preservation rules to ensure that do not inappropriately withdraw funds from their super. Taxpayers need to understand that there are limited circumstances where early release on compassionate grounds is allowed for medical procedures.


When an SMSF member is suffering with a severe medical condition and does not have the financial capacity to fund such medical treatments and expenses, they are eligible to apply for an early release of some of their superannuation funds on compassionate grounds. A written application must be sent directly to the DHS in order to be granted this release.

There are specific conditions that must be satisfied and approved of by the DHS for the release of these funds. That is, the SMSF member can be eligible for compassionate release for the following reasons:

1. Medical treatment or transport

To pay for medical treatment or transport to access said medical treatment in the following circumstances:

  • The medical treatment is necessary to treat a life threatening condition, to alleviate acute or chronic pain, or to alleviate an acute or chronic mental disturbance/illness;
  • The medical treatment is not readily accessible through the public health system; and
  • Two registered medical practitioners, one of whom must be a specialist, must certify each of the above requirements have been satisfied.

2. Special modifications to home, etc.

To pay for the following circumstances:

  • Modifications to their principle place of residence, or vehicle, to accommodate the special needs of either the member who is severely disabled, or the member’s severely disabled dependant; and/or
  • Disability aids to accommodate the severe disability,

Provided that they have received a written statement from their practitioner confirming the following:

  • The medical condition is a severe disability;
  • The modifications to the member’s home or vehicle are necessary, and/or the specific aids are required, to accommodate the disability; and/or
  • The types of modifications that are need (to the member’s home or vehicle) and why they are needed, and/or how the aids will accommodate the severe disability.

3. Palliative care

In order to fund the palliative care of a member or their dependent, in the case of impending death provided they have a written statement from their medical practitioner confirming the following:

  • That the medical condition is a terminal illness;
  • That the palliative care is needed; and
  • The period for which it is needed.

4. Funeral burial expenses

To pay for the expenses associated with the death, funeral or burial of a member’s dependent through the taxpayer’s SMSF, evidence of the death of the dependent is required by the DHS. This may include a death certificate or a letter from the dependant’s medical practitioner confirming this.


Withdrawing your superannuation funds in order to pay for cosmetic or elective surgery, such as breast implants, is unlikely to be considered as a compassionate grounds for release by the regulatory authorities.

If a member of a SMSF has withdrawn their superannuation entitlements without first meeting an appropriate condition of release, the fund has breached the operating standards by illegally allowing early access to the superannuation funds. The worst case scenario of this event would be the superannuation fund being deemed non-compliant, losing 47% of its assets in tax (minus any amounts that represent non-concessional contributions).

As well as this, the trustees of the SMSF may also be subject to penalties. These may range from the trustee being made to take an education course, the trustee rectifying the contravention, or forcing the trustee to pay an administrative penalty.

A SMSF member who has illegally accessed their superannuation funds without meeting the DHS’s payment standards will also be required to include these funds in their assessable income in their income tax return. These amounts will be taxed to the individual at their marginal tax rate. For more information on this, please refer to S.304-10 of the ITAA 1997.

Auditor’s Perspective

From an auditor’s perspective:

  • There must be a condition of release.
  • Compassionate grounds are a condition of release for life threatening illnesses.
  • The applicant applies to the regulator who in turn has delegated the assessing responsibility to the DHS.
  • If the DHS allows the application, they would accept their determination.
  • This is a policy issue, not an audit or compliance issue.

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.