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  • Access due to a terminal medical condition

    You may be able to access your super if you have a terminal medical condition.

    A terminal medical condition exists if:

    • two registered medical practitioners have certified, jointly or separately, that the person suffers from an illness, or has incurred an injury, that is likely to result in the death of the person within a period (the certification period) that ends not more than 24 months after the date of the certification
    • at least one of the registered medical practitioners is a specialist practising in an area related to the illness or injury suffered by the person
    • for each of the certificates, the certification period has not ended.

    Note: Departing Australia Superannuation Payment (DASP) are exempt.

    Access to super held by your fund

    You can ask your fund to release your super benefits if you have a terminal medical condition. There are no set limits on the amount you can withdraw from your super. However, payments are subject to the rules of your fund.

    If you satisfy this condition of release, any benefits that have accrued up to that point become unrestricted non-preserved. Any additional benefits you accrue during the certification period also become unrestricted non-preserved benefits. These can be accessed as a tax-free lump sum payment if you withdraw it within 24 months of certification.

    Any balances remaining after the certification period ends can be accessed at any time, but may not be tax-free.

    Any benefits that accrue after the certification period are not covered by the original 'terminal medical condition' condition of release. You should speak to your fund about what new certification may be required.

    Your fund does not have to give you a payment summary when they make a tax-free super lump sum payment and you don't need to include the amount on your tax return.

    How tax applies

    A payment from your fund due to a terminal medical illness will be made as a super lump sum payment.

    These payments are non-assessable non-exempt income (that is, tax-free), as long as your super is within a complying super fund or an annuity provider.

    A complying super plan is either a:

    • complying super fund
    • public sector super scheme that is either            
      • a regulated super fund
      • an exempt public sector super scheme
       
    • complying approved deposit fund
    • retirement savings account.

    To be tax free you must have a terminal medical condition either:

    • at the time of the payment or
    • within 90 days of receiving the payment.

    Access to super held by us

    If you are suffering from a terminal medical condition and you have a super credit balance being held by us, you can either ask your fund to claim this on your behalf, or you can claim it directly from us yourself.

    How tax applies

    Any amount claimed directly from us during a period of certification is treated as non-assessable non-exempt income (that is, a tax-free lump sum).

    Prior to 1 April 2018, if you claimed a direct payment from us under a different condition of release, you may still have informed us of your terminal medical condition in order to receive withholding tax concessions on the balance you were claiming.

    Note: Departing Australia Superannuation Payment (DASP) are exempt.

    See also:

    Supporting documentation

    We will only ask for you to prove your terminal medical condition once during a period of certification. If you have previously informed us of a terminal medical condition and from 1 April 2018 would like to claim your super credit balance in a lump sum direct payment, you will not be asked to reprove your condition, as long as it was provided within the certification period.

    Once the certification period on your terminal medical condition has expired, if you subsequently have a super credit balance accrued with us and would like to claim this directly, you must provide new proof of a terminal medical condition that will re-start the certification period.

    For more information refer to what is a terminal medical condition for certification requirements to prove a terminal medical condition.

    Rolling over between super funds

    You should speak to your fund and a financial advisor before deciding to roll over your super to another fund, during the period of certification. Although you may roll over your lump sum payment between super funds in accordance with Superannuation Industry (Supervision) Regulations 1994, these amounts will not be considered as 'roll-over superannuation benefits' for the purposes of income tax legislation.

    The practical tax consequences of this are that:

    • you will be deemed to have been paid a tax-free lump sum
    • your paying fund will be treated as having paid a benefit to you for income tax purposes
    • your receiving fund will be treated as having received a personal contribution from you
    • your personal contribution will be counted towards your concessional or non-concessional contributions cap, depending on whether, and to what extent, you have claimed a deduction (if eligible) for the contribution.

    Rollover or transfer of super benefits

    Super benefits may, in certain circumstances, be rolled over or transferred within the super system rather than cashed out. Subject to the rules of your fund, benefits may be directly transferred from one complying fund to another complying fund.

    You can choose to rollover your super to consolidate multiple funds. This allows you to keep track of your super and reduces the amount of fees and charges you incur.

    Consider all relevant information before deciding to rollover your super. Ask your fund about any fees or charges that apply, any loss of entitlements (for example, life insurance) or any other information about the effect this transfer may have on your super benefits. Also consult the receiving fund to make sure they accept a rollover of benefits.

    No tax is payable on the amount rolled over to another fund until you choose to withdraw your super.

    If a benefit is paid directly to you prior to being paid into another fund, the payment is considered to be outside the super system and is treated as a super benefit and treated as a personal contribution rather than as a rollover. The amount of the personal contribution will count towards your contribution cap. If you go over the cap, you may have to pay extra tax when the super benefit is transferred during the certification period.

    The preservation rules still apply to benefits that are rolled over to another complying fund. This means benefits can only be accessed once you meet a condition of release.

    Your super may be rolled over to another fund without you making a request. These are called involuntary rollover super benefits and may occur when two funds merge or due to a successor fund transfer.

    You can seek independent financial advice to help you decide if you need to transfer your super to a different fund.

    See also:

    How to apply

    Whole of super balance transfers can be requested by:

    Completing the rollover or transfer request using ATO online services allows you to view all your super accounts and removes the need for you to provide proof of identity documents to your fund.

    The forms provide most of the mandatory details a fund needs to arrange the transfer and can be lodged online or by paper. In some instances the fund may contact you to verify information provided or to seek additional information before processing the request.

    Partial transfers can only be requested directly with the fund.

    How tax applies

    A rollover of a super benefit is not assessable. Don't include it on your tax return as income. The tax treatment of the rollover benefit will arise when you access the benefit from the receiving fund.

    If you have a rollover super benefit consisting wholly or partly of an untaxed element that exceeds the untaxed plan cap amount, the paying fund will withhold the tax payable on the excess amount.

    Find out about:

    Refund of tax paid on super you received before you knew you had a terminal medical condition

    You may be eligible to receive a refund of the amount of tax withheld provided you had a terminal medical condition before the payment was made by your super fund.

    You should provide your fund with the required medical certification stating that at the time of the payment, or within 90 days of receiving the payment, you had a terminal medical condition.

    If you're requesting the refund before the end of the financial year in which the earlier super payment was made, you should request the refund from your fund.

    If the financial year in which you received the payment has ended, you should apply to us for the refund. We will require:

    • a copy of your medical certification (certified by two medical practitioners)
    • the payment summary from your fund
    • your bank account details (if you want us to pay your refund directly into your account).

    You can also apply to us for a refund of the tax paid if your fund refuses to pay the refund. You will need to provide evidence your fund has refused to refund the tax they withheld from the payment.

    Send your application to us by:

    • fax to 1300 669 756
    • mail to

      Australian Taxation Office
      PO BOX 3100
      PENRITH  NSW  2740

    Access due to temporary incapacity

    You may be able to access your super if you are temporarily unable to work or need to work less hours because of a physical or mental medical condition. This condition of release is generally used to release insurance benefits from a super fund.

    You will receive the super in regular payments (an income stream) over the time you are unable to work. A super withdrawal due to temporary incapacity is taxed as a super income stream.

    How to apply

    Contact your super fund to request access to your super due to temporary incapacity and to ask about insurance implications attached to your account.

    How tax applies

    There are no special tax rates for a super withdrawal due to temporary incapacity.

    Find out about:

    Access due to permanent incapacity

    You may be able to access your super if you are permanently incapacitated. This type of super withdrawal is sometimes called a 'disability super benefit'.

    You have a permanent incapacity if the trustee is satisfied that you have a permanent physical or mental medical condition that is likely to stop you from ever working again in a job you were qualified to do by education, training or experience.

    At least two medical practitioners must certify this for you to receive concessional tax treatment.

    You can receive the super as either a lump sum or as regular payments (income stream).

    How to apply

    Contact your fund to request access to your super because you have a permanent incapacity.

    How tax applies

    To work out how your super payment will be taxed you need to know how much of the money in your super account is a:

    • tax-free component
    • taxable component the fund has paid tax on (taxed element)
    • taxable component the fund has not paid tax on (untaxed element).

    If you're under your preservation age and receive a disability super benefit as an income stream, you will get tax offsets that reduce your tax rate by 15% on the taxed element of the taxable component you get.

    If you have reached your preservation age or if you get a lump sum, your disability benefit will be taxed at the rates described in How tax applies to your super.

    Find out about:

    Example

    Jenny is 45 years old and has a permanent incapacity. She receives an income stream from her super as an annual payment.

    On 29 August 2014, she receives $30,000. Her fund tells her it is entirely taxable component that was taxed in the fund.

    Jenny includes the $30,000 as assessable income on her tax return. She claims tax offsets that result in her paying the following effective rates of tax:

    Effective tax rate paid by Jenny

    Type of super

    Effective tax rate (including Medicare levy)

    Taxable component – taxed element: $30,000

    Her marginal tax rate less 15% tax offset

     

    End of example

    Super death benefits

    In most cases, when a person dies their super fund pays their remaining super to their nominated beneficiary. Super paid after a person's death is called a 'super death benefit'.

    If the rules of your fund allow it, you can nominate the beneficiary for your super with your fund. This nomination may be non-binding or binding.

    If a binding death benefit nomination is allowed, you can nominate one or more dependants or your legal personal representative to receive your super.

    If a deceased person did not make a nomination, the trustee of the fund may:

    • use their discretion to decide which dependant or dependants the death benefit is paid to
    • make a payment to the deceased's legal personal representative (executor of the deceased estate) for distribution according to the instructions in the deceased's will.

    If a non-binding nomination was made by the deceased, the trustee of the fund may:

    • use their discretion to pay in accordance with the non-binding nomination
    • make a payment to the deceased's legal personal representative (executor of the deceased estate) for distribution according to the instructions in the deceased's will.

    Contact your fund to find out more on death benefit nominations.

    If you're a dependant of the deceased, the death benefit can be paid as either a lump sum or income stream. If you're not a dependant of the deceased, the death benefit must be paid as a lump sum.

    Dependants of the deceased

    Different rules exist for who is a dependant when making a super death benefit payment (superannuation law) and the resulting tax treatment (taxation law).

    Super law sets out who a death benefit is payable to and taxation law sets out how the benefits will be taxed.

    Who is a dependant under superannuation law

    For the purposes of who can receive a death benefit payment, you are a dependant of the deceased if at the time of their death you were:

    • their spouse or de facto spouse
    • a child of the deceased (any age)
    • a person in an interdependency relationship with the deceased.

    An interdependency relationship exists between two people if:

    • they have a close personal relationship
    • they live together
    • one or each of them provides the other with financial support and
    • one or each of them provides the other with domestic support and personal care.

    If you would like to leave your super to someone who is not a dependant under the super laws, contact your fund about making a binding death benefit nomination to have the payment made to your legal personal representative. This will ensure your super is distributed according to your will.

    Who is a dependant under taxation law

    For tax purposes, you are a dependant of the deceased if at the time of their death you were:

    • their spouse or de facto spouse
    • a former spouse or de facto spouse
    • a child of the deceased under 18 years old
    • in an interdependency relationship with the deceased
    • any other person dependant on the deceased.

    An interdependency relationship exists between two people if:

    • they have a close personal relationship
    • they live together
    • one or each of them provides the other with financial support, and
    • one or each of them provides the other with domestic support and personal care.

    Two people may also have an interdependency relationship for tax purposes if they have a close personal relationship, and the reason they do not satisfy one or more of the other requirements of an interdependency relationship listed above is that either or both of them suffer from a physical, intellectual or psychiatric disability.

    Financially dependent on the deceased means you relied on them for necessary financial support. Children over 18 years old must be financially dependent on the deceased to be considered a dependant.

    There are limitations on who can receive a death benefit income stream. Adult children can only receive an income stream if they are under 25 years old and financially dependent on the deceased or have a permanent disability.

    Adult children with a permanent disability can continue to receive an income stream after they turn 25 years old, in all other situations the income stream must change to a lump sum on or before the date they turn 25 years old.

    How to apply

    If you believe you're the beneficiary of a deceased person's super or are the trustee of a person's estate, contact their fund to let them know the person has died and ask them to release the person's super.

    How tax applies

    The tax on a death benefit depends on:

    • whether you were a dependant of the deceased under taxation law
    • whether it is paid as a lump sum or income stream
    • whether the super is tax-free or taxable and whether the fund already paid tax on the taxable component
    • your age and the age of the deceased person when they died (for income streams).

    To find the tax rates that apply to the death benefit you will get, see:

    If you're a non-dependant of Australian Defence Force and police personnel who died in the line of duty, the lump sum super death benefits you receive have the same tax treatment as a benefit paid to a dependant.

    If you're the trustee of a deceased estate, the estate pays tax on behalf of the beneficiaries of the super. The amount of tax the estate must pay is the same as if the payment was paid directly to the beneficiary.

    If you are a dependant of the deceased

    To work out how your super payout will be taxed, you need to know how much of the money in your death benefit is a:

    • tax-free component
    • taxable component the fund has paid tax on (taxed element)
    • taxable component the fund has not paid tax on (untaxed element).

    Find out about:

    Tax-free super

    You don't pay tax on the tax-free component of the death benefit, regardless of how you receive it, your age and the age of the deceased when they died.

    Taxable super received as a lump sum

    If you're a dependant of the deceased, you don't need to pay tax on the taxable component of a death benefit if you receive it as a lump sum. Don't include it on your tax return as income.

    Taxable super received as an income stream

    You pay tax on the taxable component of a death benefit you receive as an income stream at the rates shown in this table

    Age of beneficiary and deceased (at the time of death)

    Type of super

    Effective tax rate (including Medicare levy)

    Beneficiary is more than 60 years old or the deceased was more than 60 years old

    Taxable component – taxed element

    Tax-free (non-assessable, non-exempt income)

    Beneficiary is more than 60 years old or the deceased was more than 60 years old

    Taxable component – untaxed element

    Your marginal tax rate less 10% tax offset

    Both beneficiary and deceased are under 60 years old

    Taxable component – taxed element

    Your marginal tax rate less 15% tax offset

    Both beneficiary and deceased are under 60 years old

    Taxable component – untaxed element

    Your marginal tax rate

    If you're under 25 years old and started receiving a death benefit as an income stream after 1 July 2007, you must stop the income stream and take the remaining benefit as a lump sum on or before the date you turn 25 years old. The lump sum is tax-free.

    Filling out your tax return

    If you got the death benefit through a deceased estate

    If you receive a death benefit through a person's estate, you don't need to include the death benefit in your assessable income. The estate will have paid tax on your behalf.

    If you got the death benefit directly from a fund

    The fund will send you a payment summary which shows:

    • how much of the death benefit is taxable and how much is tax-free
    • how much tax they withheld on your behalf
    • any Australian super income stream tax offsets you're able to claim.

    When you fill out your tax return you don't need to include as income:

    • the tax-free component of your super payment
    • any taxable component you get in a lump sum.

    You need to include the taxable component you get through an income stream as assessable income on your tax return, if both you and the deceased were under 60 years old or the taxable component contains an untaxed element. Claim tax offsets in the offset section of your tax return.

    If you are not a dependant of the deceased

    To work out how your super payment will be taxed, you need to know how much of the money in your super account is a:

    • tax-free component
    • taxable component the fund has paid tax on (taxed element)
    • taxable component the fund has not paid tax on (untaxed element).

    Find out about:

    Tax-free super

    You don't need to pay tax on the tax-free component of the death benefit, regardless of how you receive it, your age and the age of the deceased when they died.

    Taxable component received as a lump sum

    If you're not a dependant of the deceased and you receive a death benefit as a lump sum, the taxable component of the payment will be taxed at your marginal tax rate.

    The amount of tax you must pay may be reduced by tax offsets.

    The effective tax rate you will pay is described in this table

    Type of super

    Effective tax rate (including Medicare levy)

    Taxable component – taxed element

    Your marginal tax rate or 17%, whichever is lower

    Taxable component – untaxed element

    Your marginal tax rate or 32%, whichever is lower

    Taxable super received as an income stream

    From 1 July 2007, a non-dependant can't take the death benefit as an income stream under superannuation law. For non-dependants who had an income stream first paid to them before 1 July 2007, your payment will be treated in the same way as a payment to a dependant.

    Super death benefits paid to a foreign resident (not including former temporary residents) are subject to the same withholding rates as payments made to a resident.

    The payment is deemed to be Australian sourced income, however, if you live in, or you are a tax resident of, a country with a double tax agreement with Australia, there may be no Australian tax imposed.

    Check the taxation laws of the country where you are a tax resident and whether a double tax agreement exists between Australia and that country.

    How to apply

    If you believe that you are the beneficiary of a deceased person's super or are the trustee of a person's estate, you should contact their super fund to let them know that the person has died and ask them to release the person's super.

    If the deceased had a credit balance of ATO-held super, refer to more information on withdrawing your ATO-held super – Application for payment of ATO-held superannuation money.

    See also:

    Access to super less than $200

    You may be able to access your super if you change employers and the balance of your super account is less than $200, or if you have formerly lost super held by a super fund or by us that is less than $200.

    See also:

    How to apply

    Contact your fund to request access.

    How tax applies

    No tax is payable when accessing super accounts with a balance less than $200.

    Rollover or transfer of super benefits

    Super benefits may, in certain circumstances, be rolled over or transferred within the super system rather than cashed out. Subject to the rules of your fund, benefits may be directly transferred from one complying fund to another complying fund.

    You can choose to rollover your super to consolidate multiple funds. This allows you to keep track of your super and reduces the amount of fees and charges you incur.

    Consider all relevant information before deciding to rollover your super. Ask your fund about any fees or charges that apply, any loss of entitlements (for example, life insurance) or any other information about the effect this transfer may have on your super benefits. Also consult the receiving fund to make sure they accept a rollover of benefits.

    No tax is payable on the amount rolled over to another fund until you choose to withdraw your super.

    If a benefit is paid directly to you prior to being paid into another fund, the payment is considered to be outside the super system and is treated as a super benefit rather than as a rollover and tax may apply.

    The preservation rules still apply to benefits that are rolled over to another complying fund. This means benefits can only be accessed once you meet a condition of release.

    Your super may be rolled over to another fund without you making a request. These are called involuntary rollover super benefits and may occur when two funds merge or due to a successor fund transfer.

    How to apply

    Whole of super balance transfers can be requested by:

    Completing the rollover or transfer request using ATO online services allows you to view all your super accounts and removes the need for you to provide proof of identity documents to your fund.

    The forms provide most of the mandatory details a fund needs to arrange the transfer and can be lodged online or by paper. In some instances the fund may contact you to verify information provided or to seek additional information before processing the request.

    Partial transfers can only be requested directly with the fund.

    How tax applies

    A rollover of a super benefit is not assessable. Don't include it on your tax return as income. The tax treatment of the rollover benefit will arise when you access the benefit from the receiving fund.

    If you have a rollover super benefit consisting wholly or partly of an untaxed element that exceeds the untaxed plan cap amount, the paying fund will withhold the tax payable on the excess amount.

      Last modified: 13 Sep 2018QC 37785