Ask an Adviser -Should I Withdraw Funds From My Super To Pay For Major Dental Work? (3)

Top answer provided by:

David Romanovski

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Major dental work can be a costly exercise which can place financial pressure across available cashflows. Through my experiences, I have found unplanned expenditure such as major dental work may place a burden on family cashflows leaving the person requiring the health care treatment either adopting the dental treatment plan or not sure how to fund the dental costs. It can be a stressful time.

This example seeks further context on how to withdraw funds to accommodate major dental work by withdrawing funds from super. Although this is possible, my preferred position is to explore, in the first instance, whether alternative options are available to ensure the intended purpose for superannuation remain as a retirement savings vehicle.

On this basis, I will explore options to fund dental costs via short term lending options such as home loan redraw or personal loans. Similarly, identify if there are any debt repayment plans available via the preferred dental practitioner that can be considered.

These will be my preferred method in the first instance to ensure the intended purpose for superannuation remains in place, to save for retirement.

Assuming these options are not feasible, it is absolutely possible to fund dental costs via superannuation. However accessing superannuation is governed by strict conditions of release, generally age.

Superannuation was created to help individuals build up savings over their working life to provide cashflows over time to support a member’s lifestyle needs once they have retired from work. Accessing it before that time is regulated through strict conditions of release that need to be satisfied before any member can make any withdrawals from superannuation.

The most common conditions of release for paying benefits are when the member:

1. has reached their preservation age and retires
2. Preservation age is based on a sliding scale and increases according to the year you were born
3. For people born from the 1^st July 1964, the preservation age is 60 YOA
4. In this scenario, it is likely the person requiring dental work hasn’t met the preservation age criteria and is under 60 YOA

There are a few other conditions of release available, including starting a transition to retirement, ceasing employment on or after the age 60 or when the individual is 65 years of age even if they haven’t retired.

This article will focus on the situation where the individual hasn’t met the conditions for release.
So how do you access superannuation to help accommodate dental costs?

How can super fund dental costs?

In the event dental work is required and the individual does not meet the conditions of release from superannuation part of an individual’s super benefits can be released before the person has reached preservations age. These include;

1. terminating gainful employment
2. permanent incapacity
3. temporary incapacity
4. severe financial hardship
5. compassionate grounds
6. terminal medical condition
7. First Home Super Saver Scheme

Compassionate grounds

In this situation, a person can consider drawing out proceeds from superannuation to accommodate dental costs under ‘Compassionate Grounds’.

You may be allowed to withdraw some of your super on compassionate grounds for unpaid expenses, where you have no other means of paying for the expense.

The amount of super you can withdraw is limited to what you reasonably need to meet the unpaid expense.

Compassionate grounds include needing money to pay for:

1. medical treatment and medical transport for you or your dependant
2. making a payment on a home loan or council rates so you don't lose your home
3. modifying your home or vehicle or buying disability aids to cater for the severe disability of you or your dependant
4. palliative care for you or your dependant
5. expenses associated with the death, funeral or burial of your dependant.

Eligibility on compassionate grounds to release super

In order to qualify for a compassionate release approval can be granted if you meet all of the conditions listed below:

1. Condition 1 – You meet the eligibility requirements of the compassionate ground you’re applying for  
• Medical (treatment or transport)
• Accommodating a disability
• Palliative care for a terminal illness
• Funeral expenses for your dependant
• Preventing foreclosure or forced sale of home
2. Condition 2 – You have not yet paid the expense. We can only approve compassionate release of super to help you with unpaid expenses. If you have already paid the expense, for example by using a loan, a credit card or money borrowed from family or friends, you do not meet the eligibility requirements.
3. Condition 3 – You can’t afford to pay part or all of the expenses without accessing your super. That is you can't pay the expense by:  
   -getting a loan
   -using your savings
   -selling shares, investments or assets
4. Condition 4 – You are a citizen or permanent resident of Australia or New Zealand.
5. Condition 5 – You provide all required supporting evidence and invoices/quotes.

In this scenario it is likely the individual requiring dental work will only satisfy the criteria associated with the medical condition of release.

Let’s explore this further.

Medical treatment – There are two conditions to meet to be eligible:

• Condition 1 – You or your dependant must require treatment for either a:  
  a life-threatening illness or injury
  acute or chronic pain
  acute or chronic mental illness.
• Condition 2 – the medical treatment you or your dependant need is not readily available through the public health system.
  Although possible, it is unlikely a dental condition is life-threatening. So let’s explore how a dental health-related matter may be related to acute or chronic pain as it must be justified on the medical ground before an early super withdrawal is approved.

Although there could be a plethora of reasons causing acute or chronic dental pain, an example may include “If your teeth aren’t fit for purpose – if you can’t chew and can’t eat – causing ongoing acute pain”.

 Evidence required

In order to improve the release of superannuation funds on compassionate grounds you will need to have sufficient records available to evidence your condition, you must provide two medical reports:
-One from a registered medical specialist
-One from either a registered medical practitioner or a registered medical specialist.

The reports should clearly state that you require treatment for:
-a life-threatening illness or injury
-acute or chronic pain
-an acute or chronic mental illness.

Per earlier notation, it is unlikely your dental work represents a life-threatening situation, and more likely representing acute or chronic pain.

For example, If your teeth aren’t fit for purpose – if you can’t chew and can’t eat – causing ongoing acute pain.

Other considerations and applying for early withdrawal from super

You must apply before the expense is paid as this condition will only release funds for unpaid expenses.

Any early release from super on compassionate grounds will trigger a tax event and this withdrawal will be taxed.

Another consideration is the timing of your withdrawal request – making withdrawals when the market is down is possibly crystallising a loss that may have significant implications for your retirement savings over time. This is especially true in the current environment where significant market volatility due to coronavirus, your superannuation may not have the same value it did six months ago.

In any event, seeking professional advice and working with an experienced adviser can weigh up all of these options and considerations to help you make a well-informed decision.

To conclude, major dental work can be funded through superannuation. Is it the best solution, this depends on each person’s circumstances and as such, it is highly recommended to seek guidance from your financial adviser.

While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.

Article by:

David Romanovski

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