Accessing superannuation during terminal illness

Can I access my superannuation because of a terminal illness?

Under the Superannuation Industry (Supervision) Act, you can access your superannuation early if you have a terminal medical condition. To qualify, two registered medical practitioners (at least one of whom must be a specialist in an area related to your illness) must certify that, in their opinion, you are likely to die within 24 months. The certification does not need to say you will definitely die, only that this is the expected trajectory.

The 24-month window was extended from 12 months in 2014, specifically to give people more time and flexibility to access funds while they still have the capacity to manage and use them.

If approved, you can access the entire balance of your superannuation as a lump sum, and the withdrawal is completely tax-free regardless of your age or the components of your super balance.

How do I apply for early superannuation release?

Contact your superannuation fund directly and ask for the terminal illness early release application form. Every super fund is required to have this process in place. The form will ask you to provide certification from two medical practitioners.

Speak to your treating specialist and your GP about providing certification. Both need to be registered medical practitioners in Australia. The specialist needs to have expertise relevant to your condition. Most treating specialists are familiar with this request and will complete the certification without difficulty. Bring the form to the appointment so it can be completed in one visit.

Once your fund receives the completed application, they are required to process it within a reasonable timeframe. In practice, most funds process these applications within two to four weeks. Some will fast-track them on request if circumstances are urgent.

If you have superannuation in multiple funds, you will need to apply to each fund separately with separate medical certifications.

Is a terminal illness superannuation withdrawal taxed?

A terminal illness super release is completely tax-free. This is a specific exemption in Australian tax law. The ATO (ato.gov.au) has detailed information on the tax treatment of terminal illness super releases and what, if anything, needs to be declared in your tax return. It applies regardless of whether the money comes from the taxable or tax-free component of your super balance, and regardless of your age. You do not need to include it in your tax return as assessable income.

This is different from other forms of early super release (such as severe financial hardship) where different tax treatment may apply. If you are accessing super under the terminal illness condition, the tax-free treatment is automatic.

When should I apply?

There is no advantage in waiting. Many people delay applying because they feel uncomfortable or because the process feels like accepting the prognosis. But the earlier you apply, the more time you have to decide how to use the funds, to plan financially, and to seek advice.

If your circumstances later improve and you live beyond the 24-month certification window, you do not have to repay the funds you have already received. The release is final. Applying does not commit you to any particular outcome.

If the person with the diagnosis is your partner, encourage them to apply now. Do not wait until things are worse. The application process requires their active participation and legal capacity. If your partner has lost capacity and you hold an Enduring Power of Attorney (financial), you may be able to submit the application on their behalf. Contact the super fund and ask about their process for applications made under power of attorney.

Should I get financial advice before accessing my super?

Before deciding what to do with a superannuation withdrawal, consider speaking with a financial adviser, ideally one who has experience with estate planning or terminal illness situations. How and when the money is used, whether it flows into other structures, and how it interacts with other entitlements (including Centrelink payments and insurance claims) can all be optimised with advice.

If you cannot access or afford a financial adviser, the National Debt Helpline at 1800 007 007 offers free financial counselling and can help navigate the immediate decisions. Super Consumers Australia (superconsumers.com.au) has plain-language guides to super and early release options.

What about superannuation held in my partner's name?

If the person with the terminal illness is your partner, their superannuation is held in their name. It is not automatically accessible to a surviving partner on death without going through the death benefit claim process. The most important thing you can do now is ensure your partner has made a binding death benefit nomination with their super fund, nominating you or other intended beneficiaries.

A binding nomination tells the fund who must receive the death benefit. Without one, the fund's trustee has discretion over who receives the money, and this can lead to outcomes that do not reflect the member's wishes. Completing a binding nomination form takes about 10 minutes and can be done through any fund's member portal or by calling the fund. See the life insurance guide for related information on beneficiary nominations.