Super funds being accessed to pay for cosmetic surgery

In a speech to the Sydney Institute, Assistant Treasurer Stephen Jones has slammed the "unconscionable behaviour" of surgeons and other practitioners who he said were encouraging people to eat into their retirement nest eggs to fund optional procedures.

"There are surgeons and medical practitioners who view super as their personal river of gold," Mr Jones said.

"They are encouraging, and even pressuring, patients to tap into their super for ... procedures like cosmetic surgery."

Peak private health insurance organisation Private Healthcare Australia said there has been "a concerning rise" in the number of people draining their super funds to pay for medical treatment since the start of the COVID-19 pandemic.

"There is a growing practice of unregulated commercial operators who purport to help people write applications to release their superannuation funds to pay often exorbitant medical costs," PHA chief executive officer Rachel David said.

"Some providers and brokers appear to have their business models based on assisting people to withdraw their superannuation funds for a range of procedures that are either not essential or have a very low chance of success," Dr David said.

The Australian Taxation Office allows early access to superannuation in "very limited circumstances" for compassionate reasons including medical treatment for a life threatening illness or injury or to alleviate chronic or acute pain or mental illness.

The ATO said strict rules and requirements need to be satisfied in order to get access.

The agency said it received 42,600 applications for the compassionate release of super for medical treatment or transport costs in 2021-22. Of these, 32,100 (75 per cent) were approved, involving $544.6 million.

Numerous medical practices provide online advice about accessing super to pay for procedures including tummy tucks, skin removal following significant weight loss and breast reduction. Some include links to services that assist in preparing and lodging early release applications.

Mr Jones said some practices were operating business models "set up to game the system".

"This is deeply troubling and I am calling this out," the Assistant Treasurer said. "It is greedy. It does not pass the pub test. It is wrong."

The issue has been raised as the federal government pushes ahead with plans to enshrine the objective of superannuation in legislation.

Treasurer Jim Chalmers has launched consultations on the government's proposal to enshrine in law that superannuation's purpose is to "preserve savings and deliver income for a dignified retirement".

Mr Jones said the legislation is needed because in recent years super has become "the cash cow for bad ideas", particularly the move during the pandemic to allow people to access up to $20,000 from their super accounts, under which $36 billion was withdrawn.

The Coalition has criticised the proposed changes and Opposition treasury spokesman Angus Taylor accused the government of backtracking on its commitment to not "play around" with superannuation.

"[The Treasurer] wants more investment from superannuation in his pet projects," Mr Taylor said. "People make very long-term investments in super and so you've got to be very cautious with change in this area and I think that's incredibly important to understand."

Dr David said using super to pay for non-essential or ineffective procedures not only results in poor outcomes for the individuals involved but is helping drive an upward spiral in medical costs.

She said the practice had contributed to a 9.1 per cent increase in average medical co-payments last year, including an average $608 gap for plastic and reconstructive procedures.

"People seeking medical care are vulnerable and can be affected by physical or emotional pain," she said. "They are being taken advantage of."

Australian Medical Association president Steve Robson said superannuation should only be used to fund health care "exceptional circumstances and only after receiving comprehensive, independent financial advice".

"Superannuation should not be used as a safety net to subsidise inadequate funding of the Australian health system," Professor Robson said.