Tummy tucks and IVF: What you can access through early super release will surprise you

Money is pouring out of superannuation – legally and illegally – as savers move to tap their savings long before retirement.

Getting a tummy tuck is one of the most common types of cosmetic procedures people access super early for. Picture: iStock

You have to wonder sometimes what the Morrison government unleashed when it allowed $36bn to be removed “early” from super funds during the Covid crisis.

Overnight, the taboo that money in super was strictly for retirement was broken.

Four years later money is pouring out of super – both legally and illegally – in a rush to fix today’s problems with tomorrow’s money.

You might know there are ongoing problems with investors who start self-managed super funds (SMSFs) just to partake in property developments.

But what about getting super out early for cosmetic surgery? Yes “tummy tucks” can be paid for though your super fund. In fact, “this is one of the most common types of cosmetic procedures people access super early for”, according to the Gold Coast Plastic Surgery group.

And it’s not just property developers or cosmetic surgeons in the mix here.

Even the $15bn teachers industry super fund, NGS, is “raising awareness” that members can take super money out long before retirement to pay for IVF. As Natalie Previtera told The Australian: “We want our members to know they can apply to access super early for medical procedures, including IVF.

“For some women the time to have a child may be crucial and waiting for the day when their finances are better might not be an option.”

Meanwhile, one of the biggest operators in fertility treatment – Monash IVF – tells potential clients: “Did you know you can also access your partner’s superannuation for IVF treatment? And did you know that, should you decide on accessing super for IVF treatment, you’ll still be entitled to the full IVF rebate from Medicare?”

Let’s be clear: super is your money – and that fact becomes more important with each passing year as the volume of money in the system accumulates.

On July 1 this year the legally binding amount every salary earner has to put into super by law (the Superannuation Guarantee Charge) rises to 11.5 per cent – in other words more than one dollar in 10 now goes into super, whether you like it or not.

No wonder people are looking at what they can get out of super if they are allowed.

But it’s also beyond doubt that this was not what they had mind with concessional tax arrangements around super. The entire system is now getting so “leaky” we have to expect a crackdown before long.

The heart of the issue is that once you could only get money out of super through strict financial hardship criteria. More recently a separate channel where the application is based on “compassionate” grounds has opened the floodgates. There were more than 50,000 applications last year and three out of five applications get approved.

As the super and financial services leader at Chartered Accountants ANZ, Tony Negline, puts it: “The ATO can only administer law as it’s currently drafted. Clearly a lot of people use the rules for all sorts of medical procedures. There are rumours that some medical practices will help potential clients fill out the ATO forms. A review needs to see if the compassionate rules should be tightened,” says Negline.

Breaking the law

The spectrum of health procedures now being paid for by early super access is amazing. And it should be kept in mind that all of this money exiting super is doing so within the law.

In dentistry for example, everything from root canals to dentures can be covered by your super.

But what is not within the law is anyone actively pushing this “opportunity” on someone who never asked for it.

I was explaining this situation on radio this week when a caller from Bonbeach, Victoria, rang in and said his dentist had texted him about the capacity to pay for required dental work through his super fund.

As Sarah Abood, chief executive of the Financial Planning Association of Australia, says: “There are very clear anti-hawking provisions around the early release of super and it is something we watch closely.”

So much for the scale of legal activity – the next level is illegal early-access super and this is another ball game entirely.

A recent presentation by ATO deputy commissioner Emma Rosenzweig at the SMSFA annual conference lifted the lid for the first time on the murky world of illegal access.

According to the ATO, more than half a billion dollars went out the back door of SMSFs illegally in just two years.

The ATO managed to calculate the number for the first time by piecing together strands of investor activity – one of the giveaways here is when an individual who has previously applied for early access then attempts to set up a SMSF.

As Rosenzweig explained: “For the 2020 year we estimated $380m of super has been illegally withdrawn by trustees of SMSFs. This figure would have been half a billion dollars if we hadn’t protected over $125m leaving the system as part of our new registrant risk reviews. In the 2021 year, we estimated over $255m of super has been illegally accessed with almost $170m additional protected at registration. These are large amounts of money and do not include prohibited loans. Across these two years, a total of $635m of superannuation savings has left the system illegally through SMSFs.”

Where will it end?

Wealth editor James Kirby hosts the twice weekly Money Puzzle podcast.

Originally published as Tummy tucks and IVF: What you can access through early super release will surprise you