Australians Using Super Early for Medical Bills Face Hidden Tax Hit
- admin928749
- Jun 18
- 2 min read
More and more Australians are dipping into their superannuation early to cover the cost of critical medical treatments—but it’s coming with some financial catches.
Take Rose Charles, for example. It was Christmas 2020 when her life changed dramatically.
"I didn’t ask to get cancer, I didn’t want to get cancer," she shared.
After 16 rounds of chemo, 30 rounds of radiation, a double mastectomy and breast reconstruction, she was forced to stop working while raising a teenage son.
"You’ve still got gas bills, you’ve still got school fees," Rose said.
To get through it, she joined thousands of Australians accessing their super early.
"I only took out the cost of one procedure and that was $35,000," she explained.
And she's far from alone. More than 50,000 Australians accessed their super on compassionate grounds last financial year. That adds up to over $1 billion released.
"We’ve certainly seen an increase—about 10% over the last 12 months," said Peter Hogg, general manager at Aware Super.
But here’s where it gets tricky. What many people don’t realise, including Rose, is that you still have to pay tax when you withdraw super early.
Because super contributions are taxed at a lower rate when they go in, pulling the money out before age 60 means you have to pay back that tax benefit—up to 22%, on top of the 15% you already paid going in.
"So the government got a fair chunk," Rose said.
There is a bit of good news. If your marginal tax rate is lower than 37%, you could get some of that tax refunded at the end of the financial year.
Still, financial experts are urging caution.
"It’s quite a high rate for people who have immediate needs. We think there’s probably a better way to handle this," said Mary Delahunty, CEO of the Association of Superannuation Funds of Australia (ASFA).
The bottom line? Accessing your super early might seem like the only option when you're in crisis—but it could cost you more than expected in the long run.
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