A senior industry executive has reminded practitioners and trusees a payout from an SMSF on medical compassionate grounds must be made net of tax so the relevant application to the ATO has to be increased by this component.
“If the [client says] ‘I need $300,000 or $250,000 for life-saving medical treatment’ and they go and apply [for it] and the ATO approves it, and then the super fund deducts the tax, then that’s self-defeating,” Colonial First State head of technical services Craig Day told delegates at the recent SMSF Association National Conference 2025 held in Melbourne.
“So the amount the super fund is allowed to release is [that which is] notified in the release authority and the release authority for these reasons confirms the [total] in the notice is the net amount to be released.”
Day then emphasised the process advisers need to ensure their clients follow in order to receive the proper payment.
“[[That means] if you want to get $250,000, [you then have to determine] what the tax is on top of that so you end up with $250,000 and that total amount is the amount that you are actually paying out – the tax goes to the ATO so you pay $250,000,” he explained.
“We get that question a bit and, [after] talking to Mary [Simmons] from the SMSF Association, they get that question a bit as well.”
He took the opportunity to reinforce the evidence required to ensure a payment made from super on medical compassionate grounds.
“The medical evidence required is you need two registered medical practitioners, one [being] a specialist, that [certifies] the medical treatment is [needed] to treat a life-threatening illness or injury, to alleviate acute or chronic pain, or to alleviate a chronic or acute mental disturbance,” he said.
“[With regard to the last condition], it’s not mental illness, it is just a mental disturbance, we don’t really know what that is and the treatment is not readily available through the health system.”
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