Australians are withdrawing their superannuation early at record levels, prompting warnings from regulators about unethical practices, long-term financial harm and the growing misuse of the compassionate release scheme.
According to the Australian Taxation Office (ATO), superannuation can only be accessed early in very limited circumstances, such as for critical medical treatment, transport for medical care or to prevent home foreclosure. However, new data and reports from multiple agencies show a surge in applications that fall outside these legitimate purposes – many linked to non-essential medical or cosmetic procedures.
Warnings over misleading advice and unethical conduct
The ATO has issued a nationwide warning about misleading advice and unethical schemes encouraging Australians to extract their super for lifestyle or cosmetic treatments.
Deputy Commissioner Emma Rosenzweig says super is “saving for your retirement” and should only be accessed when absolutely necessary. She warned that the ATO was increasingly receiving reports of “dodgy advice” and health practitioners who were helping patients apply for ineligible expenses.
The regulator highlighted several concerning behaviours: inaccurate medical reports, overcharging for procedures, and unlicensed individuals preparing or submitting applications on behalf of clients. In one case, practitioners were found using patients’ myGov details to lodge applications – a clear breach of ATO guidelines.
To combat this, the ATO and the Australian Health Practitioner Regulation Agency (AHPRA) have joined forces to investigate and penalise health providers or agents promoting inappropriate early access to super.
AHPRA chief executive Justin Untersteiner said some businesses were “taking advantage of people in need”, warning that professional penalties now apply to practitioners who provide misleading medical documentation.
More than $1 billion withdrawn in a single year
Figures from the Sydney Morning Herald show that the number of individuals applying for compassionate release of super jumped from 39,000 in FY2019-20to nearly 69,000 in FY2023-24, a rise of more than 75%. In addition, the value of approved withdrawals nearly doubled in that period, from $523 million to $1.04 billion.
Medical treatments now account for the vast majority of applications. The ATO confirmed that 71,900 of the 90,700 requests lodged in FY2023-24 were for medical reasons – with 32,000 for dental treatment, triple the number recorded before the pandemic.
In FY2024-25, the trend intensified further. ABC News reported that 63,300 Australians were approved to withdraw a combined $1.37 billion for medical expenses, with $817.6 million for dental work, $254.9 million for weight-loss procedures, and $74.2 million for IVF.
The ATO said nearly a third of these medical-related applications were rejected for failing to meet eligibility requirements, reinforcing how often Australians are misinformed or misled about the rules.
The long-term cost of early withdrawals
Ms Rosenzweig has cautioned that early withdrawals come with serious financial consequences.
“Accessing super early is not free money – it will reduce the amount available in retirement and results in you paying more tax.”
Analysis by the Super Members Council found that a person who withdraws $20,000 at age 30 could be left with $93,000 less at retirement, after accounting for compounding growth over several decades.
Consumer groups, including Super Consumers Australia, have also raised concerns that some individuals are being overcharged for medical services after accessing their super, with reports of inflated treatment costs and misleading pricing practices.
For women, who statistically retire with smaller super balances than men, early withdrawals can be even more damaging. ABC News reported that women currently make up 54%of all compassionate release approvals – a figure that remains troubling given the persistent gender super gap.
Why early access rules exist – and why they matter
According to the ATO, compassionate release of super is only available in limited circumstances, including life-threatening illness, chronic pain or mental illness. Other valid grounds include palliative care, modifications to accommodate a disability or preventing home foreclosure.
The rules are designed to protect Australians’ retirement savings by ensuring early access remains a last resort, not a financial safety net for elective treatments or general expenses. However, the recent surge in withdrawals suggests growing financial stress, limited healthcare affordability and a misunderstanding of how super should be used.
Alternate funding options
Before withdrawing super, individuals should always explore alternative funding options such as insurance claims, payment plans or financial hardship support. Accessing super too early can permanently erode retirement savings and reduce future investment potential, especially for those already behind on their retirement planning goals.
A qualified financial planner can help assess whether early withdrawal is the only viable option and guide clients through legitimate, compliant processes. For example, a Gold Coast financial adviser may help clients model long-term outcomes, balancing the immediate need for funds with the compounding effect of reduced savings over time.
Comprehensive financial planning also considers cashflow, insurance cover and investment diversification – factors that can provide relief without jeopardising long-term financial security. For those facing medical expenses or unexpected costs, tailored strategies such as offset accounts, redraw facilities or low-interest personal loans may provide safer alternatives.
Protecting your future with professional guidance
The ATO and AHPRA’s coordinated crackdown on inappropriate early withdrawals is a timely reminder of the importance of trusted, regulated advice. The rise of questionable online operators and unlicensed intermediaries highlights the need for Australians to seek help from qualified professionals who understand both compliance and long-term retirement planning strategies.
At RFS Advice, our financial planners work with clients to make informed, confident decisions about their money – whether managing cashflow pressures, funding medical care, or protecting super balances for the future.
If you’re unsure about your eligibility or want to explore sustainable ways to manage unexpected expenses, RFS can help you create a plan that preserves your long-term security and peace of mind.
Contact RFS Advice to speak with a qualified Gold Coast financial adviser and learn how structured financial planning can support your wellbeing – today and in retirement.
Frequently asked questions
Yes, but only in limited circumstances. The ATO allows early access to super on compassionate grounds for critical medical or dental procedures that treat a life-threatening illness, alleviate chronic pain or mental illness, or cover necessary medical transport. Elective or cosmetic treatments, such as veneers or cosmetic surgery, do not qualify.
Withdrawing super early reduces your retirement balance and can significantly impact your long-term financial security. For example, withdrawing $20,000 at age 30 can leave you with about $93,000 less at retirement due to lost compounding growth. You may also pay additional tax on the amount withdrawn.
Applications must be made directly to the ATO through your myGov account. You’ll need to provide medical reports and supporting documents that prove you meet the eligibility criteria. It’s important to avoid unlicensed third parties or operators who offer to “manage” your application for a fee – these services can be misleading or even illegal.
Yes. Depending on your situation, you might be able to arrange a payment plan with your medical provider, claim on insurance, or explore other short-term finance options. A qualified financial planner can help you weigh these options and create a strategy that meets your needs without jeopardising your future savings.
An experienced Gold Coast financial adviser can help you assess your options and model the long-term impact of different financial decisions. RFS Advice works with clients to structure cashflow, explore insurance cover, and manage major expenses while protecting their super and retirement planning goals.
General advice warning:
The information in this blog is of a general advice nature only and has been prepared without taking into account your personal objectives, financial situation or needs. Because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to those things.
Take control of your financial future with confidence. Talk to our Gold Coast financial advisers for clear, tailored guidance at every stage of life.
