On ABC Perth Drive with Gary Adshead today, our Managing Director Mark Rattigan discussed the rise and rise of early super access for medical costs.
For many Australians, superannuation feels like the ultimate safety net – a pot of money that can be accessed in a pinch. But lately, more people are dipping into their retirement savings early to cover medical or dental costs. It might seem like an easy fix, but the long-term consequences can be far more painful than the procedure itself.
The rise of early access for medical expenses
Under the ATO’s compassionate release of super scheme, you can apply to withdraw some of your super early to pay for certain medical treatments, disability aids, or palliative care. The system was designed for people in genuine hardship – those facing life-threatening illness, severe chronic pain, or acute mental illness.
But what began as a safety net has quietly turned into a slippery slope. In the past year alone, Australians withdrew nearly $1.4 billion from their super for medical reasons. A growing number of clinics now advertise procedures alongside offers to “help you access your super,” making the process look as easy as signing a form.
Regulators are taking notice. Both the ATO and AHPRA (the health practitioner watchdog) have warned providers against blurring ethical lines by promoting elective procedures through super access.
Why using your super can be so costly
On the surface, using your super might seem like a smart way to avoid debt. After all, there are no monthly repayments or interest rates. But it’s far from free money.
If you withdraw super before age 60, the tax office will take a cut. The withdrawal is usually taxed at your marginal rate or 22% – whichever is lower. That means to get $10,000 in your hand, you may need to withdraw about $12,800 from your super.
And that’s where the real sting lies. If that $12,800 stayed invested in a typical balanced super fund earning around 7.6% per year, over 25 years it could grow to around $76,800.
In other words, a $10,000 dental procedure today could end up costing your future self more than $75,000 in retirement savings.
Is a personal loan actually cheaper?
Let’s compare it to a personal loan. If you borrowed $10,000 over five years at 7% interest, your total repayments would be about $11,960 – roughly $1,960 in interest. Compare that to the $66,800 in potential growth you forgo by pulling from your super.
So while a loan feels more expensive now, using your super is much more expensive later.
When early access does make sense
There are cases where accessing your super early is entirely appropriate – that’s what the system was built for. The ATO allows early release on compassionate grounds for:
- Medical treatment or transport for a life-threatening illness, acute/chronic pain, or severe mental illness.
- Home or vehicle modification due to severe disability.
- Palliative care for terminal illness.
You’ll need medical certificates from two doctors and proof that you have no other way to pay. In short: it’s for genuine hardship, not convenience.
Other ways you can access super early
There are a few other, legitimate pathways to withdraw super before retirement age:
- Severe financial hardship: after 26 weeks on income support and struggling to meet living expenses (up to $10,000 per year).
- Permanent or temporary incapacity: illness or injury preventing work, temporarily or permanently.
- Terminal medical condition: certified life expectancy under 24 months (tax-free).
- First Home Super Saver Scheme: to help with a first-home deposit.
Each has strict eligibility rules and documentation requirements.
Key takeaway
Accessing your super early for medical costs might seem like a quick fix, but it comes with a serious long-term cost. Before you even consider it:
- Run the numbers – what seems like $10k now could be $75k less at retirement.
- Explore alternatives like payment plans or low-interest loans.
- Get proper financial advice, not just a sales pitch from a clinic.
Your super is there to fund the longest holiday of your life – retirement. Don’t spend it before you’ve even packed your bags.
Sources:
ATO: Compassionate release of super
ATO Statistics: Applications received and approved
The Guardian: Australians withdrew $1.4 billion in super for medical procedures
ABC News: Health practitioner concerns over super access for healthcare