Changes have been made to the Income Tax Assessment Act 1997 and Superannuation Industry (Supervision) Regulations 1994 (SISR) that allow people with a terminal medical condition to access their benefits from their super fund tax-free.
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These changes were effective from 1 July 2007.
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What is the condition of release for a terminal medical condition?
You can release super benefits to a member if they have a terminal medical condition. A terminal medical condition exists if:
- two registered medical practitioners have certified jointly or separately that the member suffers from an illness, or has incurred an injury, that is likely to result in the member's death within 12 months of the date of certification
- at least one of the registered medical practitioners is a specialist practicing in an area related to the illness or injury, and
- the certification period has not ended for each of the certificates.
If they satisfy this condition of release, any benefits that have accrued up to that point in time become unrestricted non-preserved. These can be accessed as a tax-free super lump sum payment during the certification period. Any balances remaining after the certification period ends can be accessed at any time, but may not be tax free.
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Any benefits that accrue after the certification period are not covered by this condition of release. Members should talk to you about what new certification may be required.
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A payment must be made as a super lump sum payment. These payments are non-assessable non-exempt income (that is, tax-free), if the member has the required medical certification stating that a terminal medical condition existed:
- at the time of the payment, or
- within 90 days of receiving the payment.
Payments to a member with a terminal medical condition will be tax-free if paid from a complying super plan (as long as the certification requirements are met).
A complying super plan is defined as:
- a super fund
- a public sector super scheme that is
- a regulated super fund, or
- an exempt public sector super scheme
- a complying approved deposit fund, or
- a retirement saving account.
This also applies to amounts that are:
- a superannuation annuity payment
- a super guarantee payment
- a small super account payment
- an unclaimed money payment
- a super co-contribution benefit payment.
When a member applies for early release of super benefits due to having a terminal medical condition, you should also check for any credit balances and arrange for these amounts to be transferred. These credit balances may come from:
- super co-contributions
- super guarantee
- super holding account (SHA) special account
- unclaimed super money.
If you allow the early release of benefits, you should make a super lump sum payment when you receive the required medical certification.
You do not need to withhold any amounts from these payments.
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You do not need to provide the member with a payment summary, as these amounts are non-assessable non-exempt income.
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No. You are not required to report these payments to us, as these amounts are non-assessable non-exempt income.
No. If you are making a super lump sum payment to a member with a terminal medical condition and they have not quoted their tax file number (TFN), you do not need to withhold any amounts.
Members must give you their medical certification before you can make a tax-free super lump sum payment as a result of a terminal medical condition.
However, in some cases a member may have previously received a super lump sum payment that had an amount withheld and later find they have a terminal medical condition. In this case, they may be eligible to receive a refund of the amount withheld.
They should provide you with the required medical certification stating that at the time of the payment, or within 90 days of receiving the payment, they had a terminal medical condition.
The new legislation is retrospective and applies to payments made on or after 1 July 2007.
If you have paid a super lump sum to a member under another condition of release and you have withheld an amount but the member now provides medical certification that meets this condition of release, you need to:
- provide them with a tax-free payment of the amount that was withheld from the original super lump sum, and
- adjust the amount withheld downwards in your next activity statement payment period by the amount repaid.
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If the member is applying after 21 July of the financial year following the payment, advise them to apply directly to us for a refund. They will need to provide a copy of their payment summary, if you provided one to the member, and evidence of their medical certification.
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You can send their request to us either by:
- faxing it to 1300 669 846, or
- mailing it to
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For more information, refer to Accessing your super if you have a terminal medical condition (NAT 72437).
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For payments made during the 2007-08 financial year, transitional provisions applied. This means that the medical certification should state that the member had a terminal medical condition at a time when the payment was received and ending on the later of:
- 30 June 2008, or
- 90 days after receiving the payment.
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Can benefits for members under this condition of release be rolled over between super funds?
Benefits accessed by members under this condition of release can be taken as tax-free lump sums.
Although members may roll them over between super funds (in accordance with SISR), these amounts are not 'rollover superannuation benefits' for the purposes of income tax legislation.
The practical tax consequences are:
- the member is deemed to have been paid a tax-free lump sum
- the paying fund is treated as having paid a benefit to the member for income tax purposes
- the receiving fund is treated as having received a personal contribution from the member
- the member's personal contribution is counted towards their concessional or non-concessional contributions cap, depending on whether and to what extent they have claimed a deduction (if eligible) for their contribution.
How do you report benefits rolled over under this condition of release?
You should advise the receiving fund that the payment is a terminal medical condition payment.
For self-managed super funds (SMSFs) you should report these outgoing amounts at the end of the financial year at 'R - Benefit payments and code' on the self-managed super fund annual return (section F). You should mark code L in the code box.
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You must not report these amounts on the Rollover benefits statement (NAT 70944).
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If you report member contributions information using the SMSF annual return, report these amounts at 'B - Personal contributions' (section F).
If you report contributions using the member contributions statement, these amounts must be reported at Question 35 'Personal contributed amount'.
Once the certification period expires, any benefits held by the member (along with amounts that have accrued during the certification period) are no longer subject to the terminal medical condition of release and can be rolled over as normal.
Benefits accrued up to the expiry of the certification period retain their unrestricted non-preserved status.
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If a member provides you with new certification that meets this condition of release, the rollover reporting requirements will apply.
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For more information about accessing your super if you have a terminal medical condition, refer to:
Last Modified: Wednesday, 7 January 2009