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  • CRT Alert 058/2019

    Compassionate release of super tax treatment

    We’ve received some questions from funds regarding the tax treatment applied to releases under compassionate release of super (CRS) or severe financial hardship. This alert is to confirm there has been no change to the tax treatment since the CRS program transitioned from the Department of Human Services (DHS) to the ATO in 2018.

    Compassionate release of super

    The amount in the ATO approval letter to the client (and the associated notice to funds) is to be released to the individual in full as a single lump sum. Any tax or fees should not be deducted from the member’s released amount, but from the member’s super account.

    Severe financial hardship

    This is currently administered by super funds, with evidence of the Commonwealth Income Support test provided by DHS.

    Severe financial hardship amounts are capped at $10,000 in each 12-month period and withholding tax is deducted from the approved amount, within the $10,000 capped releasable amount.

    Next steps:

    To improve the client and fund experience, we will be updating the CRS client approval letter to specify that extra amounts will be deducted for withholding tax. We’ll also update the fund notification issued via bulk data exchange (BDE) for your members.

    See also:

    This, and other useful information, was referenced in CRT Alert 058/2018 and the link to questions and answers on the Let's Talk – Superannuation CommunityExternal Link (click the compassionate release topic tag).

      Last modified: 17 Dec 2019QC 61022