Super access rules may broaden

Summary: New recommendations will make it easier for women to access their super in tough times – such as divorce and domestic violence.

Key take-out: The government is looking to change some of the rules surrounding superannuation access.

A better superannuation deal for women is on the cards, with the government considering several changes regarding divorce and domestic violence.

Domestic violence could be added to grounds to receive early access to super, while the ATO will be given powers to share the true value of super balances in divorce proceedings.

The Tax Office will receive $3.3 million to develop an electronic information-sharing platform to ensure Family Court participants have better visibility over super balances.

It has long been complained that in Family Court matters, some parties (men predominantly) have not fully disclosed, or have been uncooperative when it comes to tabling full superannuation balances, along with other assets.

This has added significant time and stress to Family Court procedures, with parties often going on, "fishing expeditions using subpoenas and other formal court processes, with no guarantee of success", according to Minister for Women, Kelly O'Dwyer.

"Parties to family law proceedings are legally required to disclose all of their assets to the court, including superannuation, however, in practice, parties may forget, or deliberately withhold, information about their superannuation assets."

O'Dwyer said non-disclosure often disproportionately disadvantages women due to the considerable imbalance between male and female super balances.

Regarding domestic violence, the government is looking to allow victims to potentially access up to $10,000 of their super over a two-year period as part of a revamp of the early access rules.

Access to super in Australia is restricted to those who have met a condition of release. While for most this is death, turning 65, attaining preservation age, or hitting 60 and changing employers; there are nine other – albeit less-used – categories.

These include temporary incapacity, permanent incapacity and terminal medical conditions where the member is likely to die within two years.

But it also includes early access to superannuation for Australians going through tough times, under two main categories.

These are known as ‘severe financial hardship’, and ‘compassionate grounds’.

The former is predominantly for those unable to meet living expenses who have been on Centrelink payments for at least 26 weeks.

Compassionate grounds allow members to dip into their super for medical treatment, to make loan repayments where foreclosure is a risk, and to modify the home for disabled members or dependants. It can also be used to meet palliative care needs for the member, or for the palliative care needs or funeral of a dependant.

The government has proposed that a new category relating to family and domestic violence be added to ‘compassionate grounds’.

Evidence would be required in the form of either a court order regarding the violence, or two other pieces of evidence – such as reports or statutory declarations – from professionals including police, doctors or psychologists.

There was considerable discussion in the government's consultation groups around how super accessed under domestic violence provisions could be used. However, the government hasn't proposed to place limits in this area.

The domestic violence recommendations were part of a broader package of 13 reforms being considered for those seeking early release of their superannuation.

The other recommended changes include making the ATO a one-stop shop for all applications for early release under both severe financial hardship and compassionate grounds, the latter of which they took over this year.

Among the remaining proposals, one addition to the rules was to include extending medical treatment conditions of release to cover dental treatment.

The remaining proposals were largely to tighten or restrict access where definitions were unsatisfactory, or where abuse of the system had become an issue.

The eligibility under mental health grounds would be tightened to, "treat a diagnosed mental illness or behavioural disorder", removing "mental disturbance", which doctors said was too vague.

Though the report didn't say it specifically, too many Australians were accessing their superannuation to have medical treatment (often cosmetic procedures) overseas, while enjoying a bit of a holiday for themselves and a friend.

As a result, release on medical treatment grounds for overseas treatment will only be available for life-threatening conditions.

The government is also looking to ensure that under medical treatment options, two physicians must certify that the treatment is reasonable given the circumstances. In addition, one must be a specialist in that particular field of illness or injury, and the other must be their regular doctor.

The government is also recommending that regulators give information to members regarding alternative avenues of support in an attempt to make early access to superannuation a ‘last resort’.

Those wanting early access to housing (i.e. meeting mortgage repayments) are going to face tighter restrictions. These will include only being able to receive access every two years, while their lenders are going to have to agree that the member will be able to service the loan once the arrears have been rectified.

For those with severe disabilities, the definitions will be expanded to allow them to access superannuation to buy disability aids and specially modified vehicles.

When it comes to accessing super under ‘severe financial hardship’ provisions, members have always had to show that they were in receipt of Centrelink support for the previous 26 weeks. It has been recommended that this be changed to at least 26 weeks out of a 40-week period.

The closing date for submissions is February 15, 2019.

The information contained in this column should be treated as general advice only. It has not taken anyone’s specific circumstances into account. If you are considering a strategy such as those mentioned here, you are strongly advised to consult your adviser/s, as some of the strategies used in these columns are extremely complex and require high-level technical compliance.