In a statement last week, Minister for Revenue and Financial Services Kelly O’Dwyer said Treasury will be reviewing the current rules governing early release of superannuation in cases of severe financial hardship and on compassionate grounds.
It will also review whether superannuation assets should be available to pay compensation or restitution to victims of crime, and in what circumstances.
Ms O’Dwyer said an issues paper will be released before the end of this year and the review will make recommendations to government early in 2018.
The government has also announced that it will transfer the regulatory role of administering the early release of superannuation benefits on compassionate grounds from the Department of Human Services to the Australian Taxation Office (ATO), with the transfer expected to take effect in 2018.
“The ATO is responsible for most of an individual’s interactions with the superannuation system — in particular, through its ownership of the superannuation portal for individuals,” said Ms O’Dwyer.
“This change will enable the ATO to provide a more streamlined service to members.”
As part of this change, she explained, the government will allow the ATO to notify a superannuation fund when it has authorised the early release of superannuation benefits on compassionate grounds.
“This change recognises the existing strong relationship between the ATO and the superannuation industry and reduces the need for manual, paper‑based processes – expediting the release of funds to successful applicants,” Ms O’Dwyer said.
As part of the review into the early release of superannuation benefits, Treasury will review whether the current rules governing the early release of superannuation benefits on compassionate grounds and in cases of severe financial hardship — regulations 6.19A and 6.01 of the Superannuation Industry (Supervision) Regulations 1994, respectively — remain fit for purpose, said Ms O’Dwyer.
Treasury, she said, will consider whether the current rules appropriately balance “the need to preserve superannuation benefits to meet the objective of providing income in retirement to substitute or supplement the age pension”, while ensuring that “superannuation is available for current consumption in certain, limited cases of genuine hardship or where warranted for compassionate reasons”.
The review looks set to ensure that the “rules can be administered fairly and effectively”, she said.
“The review will also consider and make recommendations on whether a perpetrator’s superannuation should be accessible to pay compensation or restitution to a victim of crime; and, if so, the circumstances in which this may be appropriate,” she said.
Ms O’Dwyer confirmed that the review will not examine other general conditions of release for superannuation.
The rules governing early release of superannuation have not changed substantially since 1997, she said.
“The superannuation system has come a long way since then. It is time to review the current arrangements as they relate to severe financial hardship and compassionate grounds to ensure they remain fit for purpose,” she said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.