Question
Some time ago, a friend of mine was able to access her superannuation to undergo extensive and expensive dental treatment.
I am in my early 40s. Following a sporting injury some time ago, I have a knee that is painful. It has been suggested that I need surgery to complete a total knee replacement.
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Would I be able to access my superannuation to cover the costs of this operation?
Answer
The superannuation early access scheme for medical reasons was under the spotlight some time ago because of the potential abuse of the system. Accordingly, the controls are now much tighter.
The specific criteria is contained within superannuation laws that deal with releasing funds early on “compassionate grounds”.
Firstly, check that your super fund will allow early access to super. You would then need to apply to the Australian Taxation Office for a determination that some of your superannuation benefits can be released.
This can be for certain expenses already incurred such as medical treatment or specialised medical transport for you or one of your dependants.
It can include a release for a payment towards a loan to prevent foreclosure of a mortgage on your home or to modify your home or vehicle to accommodate the special needs of you or a dependent with a severe disability.
Compassionate grounds can also be used to cover the costs associated with final expenses and palliative care in the case of impending death for you or one of your dependents.
In your case, as the money is required for upcoming medical treatment you would have to provide the ATO with medical certificates from two medical practitioners. One of these needs to be a specialist and, in your case, probably an orthopaedic surgeon.
The two medical professionals would need to certify that the medical treatment is necessary to satisfy one or a combination of issues. These include a life-threatening illness or injury, to alleviate chronic pain or to alleviate an acute mental disturbance.
Finally, the treatment cannot be readily available through the public health system. It may be the case that you satisfy the “alleviate chronic pain” condition but you should firstly discuss this with the medical experts described above.
Also be aware that because you are under 60 years of age and have not satisfied a retirement condition of release, up to 20 per cent tax will be payable on the amount accessed.
For example, if $45,000 is required for the surgery you will need to withdraw $56,250.
Question
I plan to lodge my tax return as soon as possible and am querying why my tax refund last year was less than expected.
I am a 70-year-old single person with a share portfolio made up of stock that I purchased over the years including Commonwealth Bank, AMP and Telstra.
The franking credits last financial year totalled $2364 but I was also entitled to the full seniors and pensioners tax offset of $2230 because my income was less than $34,919.
What happened to the extra money?
Answer
It appears that your tax refund was calculated correctly.
Most tax offsets or credits are use-it-or-lose-it. This includes common offsets such as the low income tax offset, the senior and pensioners tax offset and the spouse superannuation contribution offset.
In simple terms, these offsets or credits reduce your tax payable. If tax has already been paid — generally through the Pay as You Go system (including employer income tax payments on your behalf) — the reduction in tax payable results in a refund of the extra tax already paid.
The exceptions to use-it-or-lose-it include franking or imputation credits, withholding tax credits (where you fail to provide a tax file number) and the private health insurance rebate.
The credits will firstly reduce your tax payable, but if not used they are refunded.
In the case of health insurance rebates, most people take that rebate as a reduction in the premium charged.
