Accessing superannuation to fund dental treatment
There has been an explosion in the number of people accessing superannuation for dental treatment in the past two years, which raises concerns about how this is being marketed to patients.
Imagine a scenario where a patient has been provided with a $70,000 plan for extensive dental treatment that includes implants and veneers. It’s a huge financial outlay for the average Australian, but the dental practice (for a fee) offers to assist the patient to gain early release of some of their superannuation to help pay for the treatment. Setting aside the appropriateness or otherwise of the proposed treatment, it’s worth exploring the use of, and perhaps more importantly the promotion of the use of, superannuation in this way.
What is the purpose of superannuation? Although the original legislation more than 30 years ago did not include a specific objective for the scheme, it did make clear that the activities of superannuation funds must be for the sole purpose of providing retirement benefits for their members. There is currently a bill before parliament that aims to legislate an objective, namely that superannuation is ‘to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.’ It is safe to assume therefore that superannuation is intended to fund retirement and should not be considered general savings for discretionary use.
Nonetheless there does exist a mechanism to gain early release of funds in limited circumstances. One of those is on compassionate grounds, which includes for medical treatment (including dental treatment), palliative care for a terminal illness or to modify a home or vehicle to accommodate for a severe disability.
There are very specific (and narrow) eligibility criteria for early release to fund medical treatment. It must be to treat a life-threatening illness or injury, to alleviate acute or chronic pain or to alleviate acute or chronic mental illness, and where the medical treatment is not readily available through the public health system. Certainly given the limited access to publicly funded dental care, the last criteria would be met in most circumstances for dental treatment. Some treatment is ineligible, for example cosmetic procedures that are not required to treat a life-threatening illness or alleviate acute or chronic pain or mental illness.
So how common is early access to superannuation for dental treatment? A review of the recent data shows an alarming trend which should be of concern to both the government and the dental profession.
In 2018/19 a total of 38,800 individuals applied for early release of their superannuation for any reason, with 26,900 approved for a total amount of $456.4 million. Dental treatment was a relatively small component – 4,310 individuals applied, 3,470 were approved for a total of $66.4 million, which represented 14.5% of the total amount released.
However, by 2022/23 the picture had changed dramatically. Overall, the number of individuals who applied had increased to 57,800, with 39,600 approved for a total of $761.7 million. However, the number of people applying to fund dental treatment had grown nearly four times to 16,260, with 13,540 approved to access $313.4 million. That means that dental treatment now accounts for 41.1% of all early release funds.
Not only has the number of individual grown exponentially, but the average amount per application has increased from $19,135 in 2018/19 to $23,146, a 21% increase. And whilst there has huge growth in access for dental treatment, that is not broadly reflected in other categories. The number of people approved for dental treatment has increased 290%, compared with 34% for IVF, 15% for weight loss, or 49% for other medical reasons.
What is driving this disproportionate use of superannuation for dental treatment? Certainly with inadequate public funding for dental services combined and a significant social gradient in oral health, dental care is unaffordable for a large proportion of the population. Early access to superannuation is clearly a mechanism to help many people improve their oral health. This is no doubt being facilitated by marketing from dental practices highlighting the ability to access superannuation to fund major dental treatment. This has prompted the Financial Services Minister Stephen Jones to query this trend:
“There are surgeons and medical practitioners who view super as their personal river of gold. They are encouraging, and even pressuring, patients to tap into their super for what might be termed life‑enhancing procedures like cosmetic surgery. There are business models set up to game the system. It is greedy.”
It is important to consider the financial impact over the long term of early withdrawal of superannuation. It is estimated that a 30-year-old who withdrew $20,000 from superannuation now would be nearly $100,000 worse off by retirement. And there are other financial implications that patients need to be aware of, with the likelihood of tax payable on the amount withdrawn, which will also generally count towards assessable income, affect things like child support payments or family tax benefits. This should form part of the informed financial consent process if dental practitioners are promoting the use of superannuation to fund dental treatment.
Given the longer terms impacts on retirement (and therefore financial implications for governments) and the concerns expressed by the Financial Services Minister, there is the likelihood that the proposed changes to define the purpose of superannuation will make it more difficult for patients to access funds to pay for dental treatment in the future.
Recent publication
Check out our recent paper Primary care dentistry: An Australian perspective out now in the Journal of Dentistry.
Primary care dentistry is the first point of contact that someone has with the dental system and is predominantly focused on the treatment and prevention of dental caries and periodontal disease. Australia is at a crossroads with respect to access to dental care, and there is a need for stronger advocacy from stakeholders to improve oral health outcomes and reduce inequalities. The aim of this paper was to review the Australian primary dental care system.