Accessing superannuation during terminal illness

Can I access my superannuation because of a terminal illness?

Under superannuation law, 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.

If approved, there is no set limit on how much you can withdraw, though your fund's rules apply. Lump sums paid within the 24-month certification period are tax-free, whatever your age.

How do I apply for early superannuation release?

Contact your superannuation fund directly and ask for the terminal illness early release application form. Your fund will tell you how it handles these requests. 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. Bring the form to the appointment so it can be completed in one visit.

Ask the fund how long it expects to take, and tell it if the situation is urgent.

If you have superannuation in multiple funds, you will need to apply to each fund separately. Ask each fund what evidence it needs; some will accept copies of the same certificates.

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. Under the terminal illness condition, the payment is tax-free as long as it is made within the 24-month certification period.

When to apply

The timing is your decision, and there are things to weigh on both sides. Once money leaves super it may count differently for Centrelink, and closing an account can end any insurance attached to it. Talk to your fund, and to a financial adviser or financial counsellor, before you decide when to apply.

Consider financial advice first

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. The National Debt Helpline website (ndh.org.au) has information on accessing super early.

If you are their partner or carer

This guide speaks to the person with the diagnosis, because the application is theirs. Two things fall to you.

The first is helping them apply early. The fund needs them to take part and to have legal capacity when they do, which is easier now than in a few months. If they have already lost capacity and you hold their enduring power of attorney, you may be able to apply for them. Ask the fund how it handles that.

The second is knowing what happens to their super if they die. It is held in their name, does not automatically pass under their will, and goes through the fund's death benefit process instead. A binding death benefit nomination tells the fund who must receive it. Without one, the trustee decides, and that may not match what they wanted. A binding nomination does not suit everyone. The fund and a solicitor can tell them whether it suits them.

What it takes to make one depends on the fund, and funds differ more than you would expect. Some let the member do it online in a few minutes. Others require a paper form signed in front of two witnesses, both over 18 and neither of them named in the nomination. Funds also differ on whether the nomination lapses after three years or stays in place until it is changed. The fund's own form is what sets this, so it is worth reading there rather than assuming either way. A self managed fund follows its own trust deed instead.

The member signs it themselves. It also has to be done with each fund separately, because a nomination applies only to the account it was made against. See the life insurance guide for related information on beneficiary nominations.