More Australians are dipping into their superannuation early to pay for medical bills and super purists warn this is not healthy. It’s a quandary as old as Australia’s compulsory superannuation system: should super funds be quarantined for the purpose of providing retirement income, or does the “it’s their money” argument trump the ideal of a sacrosanct nest egg?
In 2000-2001, $42 million in super was released early on compassionate grounds, according to Treasury data; by 2016-17 this had surged to $290 million. While this is negligible in Australia’s $2.5 trillion superannuation system, a discernible trend has some observers worried.
The number of people accessing their super early for medical expenses grew from 4000 in 2010-11 to 15,000 in 2016-17 with 56 per cent in the first quarter of 2016-17 withdrawing for weight loss surgery.
Obesity clinics, like Sydney-based agency SuperCare Australia, actively promote early access to super as a means of paying for treatment, creating a mini “advisory” industry. SCA charges clients a fee of $680 to facilitate applications to the Department of Human Services for the early release of funds for medical expenses.
Clients are usually referred by clinics or doctors.
“It is a great way of paying for surgery,” CEO Zain Merhebe told The Australian.
The federal government is sufficiently concerned to launch a review into whether the rules of access need tightening.
The government is walking a tightrope on the issue as Financial Services Minister Kelly O’Dwyer acknowledged during a doorstop with journalists in Melbourne on Tuesday.
The minister agreed there had been “a significant increase” in the amount of money released early from super accounts but acknowledged legitimate compassionate grounds.
“It’s critical that we protect [retirement incomes] but it’s also important to note that there are times where people undergo severe stress and hardship,” Ms O’Dwyer said.
“It’s appropriate that in those circumstances people be given access to their money on an early basis.”
However, she also observed the rules for early access haven’t changed in 20 years and the review aims to ensure the government strikes “the right balance” between the integrity of the superannuation scheme and the legitimate needs of those who seek early access to “their money”.
Increasing early access of superannuation funds for medical conditions – in particular weight loss surgery – raises questions over and above the integrity of the superannuation system.
Obesity is clearly a growing problem in Australia, as it is elsewhere in the world. At a time when the federal government is being pressured to introduce a sugar tax to tackle the obesity epidemic, the government might also consider ways of using tax concessions to subsidise weight loss surgery, which would improve the health of Australians while reducing early calls on superannuation. It must also ensure the public health system is adequately resourced to handle the obesity explosion.
As the president of the Australian Medical Association, Dr Michael Gannon, has noted, Australia’s superannuation system was not designed to be a safety net for the health system. He argues people are accessing their super for weight loss surgery in the private system because of public hospital waiting lists of two to three years.
“There are very limited public hospital services in this important area …we want to see an expansion of the bariatric [weight loss] surgery options in the public system,” Dr Gannon said.
The Turnbull government, which prides itself on its agility and policy smarts – not always evident to the naked eye – would do well to consider the issue of early access to super as the symptom of a much bigger problem.
Leo D’Angelo Fisher is a former associate editor and columnist with BRW and columnist for the Australian Financial Review. He was also a senior writer at The Bulletin magazine.