Access to super for members with a terminal medical condition
Condition of release
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 24 months of the date of certification
- at least one of the registered medical practitioners is a specialist practicing in an area related to the member's illness or injury
- the certification period has not ended for each of the certificates.
The certification period is 24 months from the date of certification.
If they satisfy this condition of release, any benefits that have accrued up to that point become unrestricted non-preserved. Any additional benefits accrued by the member during the certification period also become unrestricted non-preserved benefits. 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.
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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How payments are taxed
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 either:
- at the time of the payment
- within 90 days of receiving the payment.
Lump sum payments to a member with a terminal medical condition will be tax-free if paid from a complying super planExternal Link or an annuity provider (as long as the certification requirements are met).
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 saving account.
Other credit balances
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 held by the ATO 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.
Alternatively, your member can make a request to the ATO for certain eligible amounts to be paid directly to them.
Making a tax-free super payment
If the early release of benefits is approved, you should make a super lump sum payment upon receipt of the required medical certification.
You do not withhold any amounts from these payments.
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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You do not need to report the payment to us
You are not required to report these payments to us, as these amounts are non-assessable non-exempt income.
Providing medical certification
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.
Making a payment under another condition of release
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 confirms they have a terminal medical condition, 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.
To refund the amount withheld, you need to:
- provide the member with a tax-free payment of the amount that was withheld from the original super lump sum
- adjust the amount withheld downwards in your next activity statement payment period by the amount repaid.
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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A request for a refund can be sent to us either by:
- faxing it to 1300 669 846
- mailing it to:
Australian Taxation Office
PO Box 3100
PENRITH NSW 2740
Rolling 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 Superannuation Industry (Supervision) Regulations 1994, these amounts are not 'roll-over superannuation benefits' for the purposes of income tax legislation.
The practical tax consequences are that the:
- member is deemed to have been paid a tax-free lump sum
- paying fund is treated as having paid a benefit to the member for income tax purposes
- receiving fund is treated as having received a personal contribution from the member
- 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 to report benefits rolled over under this condition of release
When rolling over these member benefits to another fund
Advise the receiving fund that the payment is a terminal medical condition payment.
For self-managed super funds (SMSFs), report these outgoing amounts at the end of the financial year at 'R1 - Lump sum payment' on the self-managed super fund annual return (section F or G). You should mark code E in the code box.
You must not report these amounts as a rollover benefit to the receiving fund.
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When receiving these member benefits from another fund
If you report member contributions information using the SMSF annual return, report these amounts at 'B - Personal contributions' (section F or G).
If you report contributions using the member contributions statement, these amounts must be reported at Question 35 'Personal contributed amount'.
When the certification period expires
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' condition of release and may be rolled over as normal.
Benefits accrued during the certification period retain their unrestricted non-preserved status.
Information for super funds about making tax-free lump sum payments to those with a terminal medical condition.
If a member provides you with new medical certification that meets this condition of release, the rollover restrictions will apply again.
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