Australia’s #1 Self Managed Super

Accessing  your Super fund when suffering a medical condition

In our previous blog we discussed the amendment in Tax Law that benefits people who are terminally ill. These tax breaks are very welcome and help not only those who are suffering from a terminal illness or injury but for those of us who are investing or planning to invest in a Super fund as they provide peace of mind providing the knowledge that you will be able to access your super fund if you have serious health problems.

This blog will focus on how to go about claiming your Super fund when in a terminal medical condition. First of all lets revise the requirements to access your Super fund. For you to be considered to be with a terminal medical condition there are three main requirements.

1)    Two doctors must certify that you are terminally ill or injured and that you are likely to die within 12 months.
2)    One of these doctors must be a specialist in the area of expertise that encompasses the illness or injury.
3)    When you request access to your super fund the certification period cannot have ended

Even if the third requirement is not met you might still be able to access your Super fund, although it might not be Tax Free. In fact any benefits from contribution after the medical certification period is over will not be covered by these conditions of release. Your super fund managers should talk to you about what new certification you can provide.
How are Super funds accessed by people with a terminal medical condition taxed?

As explained in our previous blog these people will not have to pay tax, they will be non assessable non exempt income, in other words TAX FREE! Of course for tax free exemption the medical condition must exist when the payment is made or at the very least within 90 days of receiving the payment.

It is also required that the tax free payments are paid from a registered and complying super fund or attached pension fund. This category includes, super funds, public sector super programs, approved deposit funds and retirement saving accounts.

Can you be entitled to any other credit balances?

When you claim for early release for a medical condition you should also check for any credit balances and make sure these amounts are transferred. You could receive these credit amounts from the Government’s super co-contributions, the contributions paid by your employer and other unclaimed super money.

What should you do once you receive the early release medical certificate?

You should make a super lump sum payment as soon as you receive the medical certification. As mentioned these payments are tax free and you don’t need to withdraw any of the payments for tax. You do not need to provide a payments summary to your Super fund member as in other circumstances or report to the Tax Office as these payments are non assessable.
These payments are payable to you even if you do not have a tax file number or have not provided it to the Super fund manager. Make sure your Super fund is not withholding any of your valuable super payment

Tax free Super for the terminaly ill.

It is a subject we rarely want to deal with but unfortunately many of us will become terminally ill before we reach 65 years of age. Only those who are going through this situation or whose family members are can fully understand the pain and difficulties a terminal illness brings to the patient and his loved ones.
It might be of little comfort to the patient but thanks to a new tax amendment (2008 Measures No. 2) Act 2008, super members that are terminally ill will not have to pay tax when they cash their super fund early.  I guess dying is the only way of cheating the tax man out of a buck.

On a more serious note, this tax break can be of great help to people in such a terrible situation. They can help to increasing the quality of life if special care or conditions are required due to the illness. It can also provide help to the family and mitigate the great expenses often associated with terminal illnesses.

There is no question these tax breaks will help and be of great interest to the super fund member and his loved ones. The question we are more interested in is how can we make sure we make the most out of this tax break.

The devil is, as they say, in the detail. The fly in the ointment of the tax break is that it will apply only to payments made from 1 July 2007, previous payments will be taxed under the previous regulations.
As described in the above mentioned Tax Law Amendment there will be a new condition of release for super fund members, a terminal medical condition.

What is meant by terminal medical condition?

A member is terminally ill if two doctors, one of them being a specialist certify that the person has an illness or has suffered an injury that is likely to cause death within a 12 month period. It sounds obvious, but it is part of the requirement that the certification period of 12 months cannot have already gone by when claiming the super fund.
This change in Australian Tax Law will help ailing and suffering people with a little extra peace of mind and the financial help they need. If you are currently undergoing this or a similar circumstance get in touch with the Tax Office for more details and information on where you stand.

This amendment also provides peace of mind to those of us who are working hard to invest in our Super fund. It is good to know that if you really need it you can access your savings even though you have not reached 65.