Rising Compassionate Withdrawals Spotlight Health Costs and Regulatory Risks
Australians have increasingly turned to their superannuation to cover urgent medical needs, with more than 1.4 billion dollars approved on compassionate grounds in the past financial year. The trend, which has persisted since 2018-19, is drawing scrutiny from consumer groups and regulators who fear some arrangements may be skewed toward expensive or unnecessary medical treatments.
The Australian Taxation Office (ATO) reported that the majority of compassionate releases are for medical treatment or related transport, and the latest figures show a continued surge in approvals for health-related expenses. This year’s 1.37 billion-dollar tally for medical reasons sits above the prior year and marks a sharp rise from 2018-19, underscoring how deeply health costs—especially dental work—are driving early access to superannuation.
Health practitioners and registered agents have been urged to align requests with the stringent compassionate grounds framework. Deputy Commissioner Emma Rosenzweig emphasised that early access is restricted to specific circumstances, including critical medical or dental procedures, and should not be a backdoor for cosmetic or non-essential treatments.
Why Dental Costs Dominate the Compassionate Withdrawals
Among the medical categories, dental procedures were the most common use of compassionate releases, accounting for 817.6 million dollars in 2024-25. Dental care is frequently cited as a gap in Australia’s health system—particularly for adults without comprehensive coverage—pushing some individuals to rely on super funds to meet necessary care. Beyond dentistry, other notable allocations included weight-loss treatments (254.9 million) and in vitro fertilisation (IVF) services (74.2 million), reflecting the broad spectrum of medical needs people see as urgent enough to warrant early access.
Regulatory Attention and New Guidance
The uptick in approvals has prompted warnings from the ATO and AHPRA (the health practitioner regulator) about business models that exploit compassionate grounds. The ATO attributed part of the growth to misreporting or misalignment with compassionate release requirements, including cases where medical or dental reports suggested procedures not strictly necessary under the rules. About 30 percent of medical treatment applications were rejected last year for not meeting the criteria.
In response, AHPRA and the Medical and Dental Boards of Australia issued new guidance to practitioners. The aim is to ensure thorough assessments by appropriately skilled professionals and to put the patient’s health first, rather than financial incentives. Consumer advocates warn against broad-brush criticism of patients who need to tap into their super early, stressing that many withdrawals arise from genuine gaps in the health system.
What It Means for Consumers
Experts emphasise that using superannuation early can significantly affect retirement security, especially for women who have historically faced greater retirement shortfalls. While compassionate access is legally permitted under narrow medical, dental, palliative, or disability-related circumstances, it is not a universal solution for health costs. The rules require two medical practitioners to attest that proceeding with treatment is necessary to alleviate pain, treat a life-threatening condition, or address a mental health issue.
Health advocates reiterate the importance of seeking second opinions and evaluating all options before withdrawing funds. As Xavier O’Halloran, CEO of Super Consumers Australia, notes, some instances of overcharging point to broader problems in how medical costs are priced and reported. He insists that the focus must remain on patient welfare rather than monetary gain, while recognizing that many legitimate cases involve dental care and other essential treatments not fully covered by the public system.
Who Is Being Most Affected?
The demographics show people aged 31–55 account for about 75 percent of compassionate withdrawals, with those earning between $45,001 and $120,000 making up the bulk of approvals. Geographic patterns place Queensland, New South Wales, and Victoria in the lead. Women continued to comprise slightly more than half of the recipients (54 percent), a gap that has narrowed since 2018-19 when women represented 64 percent. Advocates say this data should inform policy decisions aimed at improving access to affordable medical care without compromising retirement savings.
Ultimately, the conversation around compassionate super withdrawals underscores a core tension: patients need timely access to essential health services, while taxpayers and regulators seek to protect long-term financial security. As the health system grapples with gaps in coverage, the collaboration between regulators, practitioners, and consumer groups will shape safeguards that ensure compassionate access remains targeted, transparent, and in the patient’s best interest.
