Super changes provide relief for some

The recent budget announcement may have centred on Small Business and Multinational Profit Shifting (A.K.A Netflix/Google tax), but a minor change elsewhere will be making a big difference to some sufferers of terminal illness and their families.

Somewhere buried in the budget headlines, the Government announced that the conditions under which an individual suffering a terminal illness can access their superannuation benefits will be amended.

Currently, access to benefits using the ‘terminal medical condition’ of release requires an individual to obtain certification from two medical practitioners (one of whom is a specialist practising in the area related to the injury or illness) stating they are likely to have less than 12 months to live. This time period is proposed to be extended to 24 months with effect from 1 July 2015.

This may not mean much to some, but for those suffering from terminal illness with no other source of funding to pay for essential services or medication, this is life changing. It is often difficult for those who have not had their lives been impacted by someone suffering a terminal illness to imagine what it’s like. To put it into context let’s have a look at a few figures around a common terminal illness – cancer:

According to the Cancer Council 1 in 3 women and 1 in 2 men are diagnosed with cancer before the age of 85. That’s 33.33% and 50% respectively. The types of cancers that are most common in their respective order are:

1. Prostate (85.3% survive 5 years)
2. Bowel (61.8% survive 5 years)
3. Breast (87.8% survive 5 years)
4. Melanoma (91.6% survive 5 years)
5. Lung (11.8% survive 5 years)

The type of insurance that would provide lump sum benefits for the diagnosis of any of these types of cancers is the Critical Illness or Trauma cover. It is expensive, and it does not provide any tax benefits either purchased inside or outside super. Due to the strict nature of early release of superannuation rules, this type of insurance is not normally purchased inside super funds. 

As a result, few people have this type of cover, and understandably so.

Just imagine that you have no room in your cash budget to pay for decent Trauma cover and it isn’t covered under superannuation at all. What if you had been diagnosed with lung cancer and given 18 months to live? You’re quoted an estimated $100,000 in treatment costs to give you some quality of life. You only have $100,000 in super and a small amount of savings.

Under the current superannuation rules, you fall outside their strict rule of dying within 12 months to be able to access what you have in super to help you and your family in the immediate term. There are a variety of ways for people could raise funds for your treatment, but there are no guarantees. You could sell your family home (provided your have one with a decent amount of equity). You could beg and borrow. The problem is that all of these require time and effort, and borrowed funds ultimately needs to be paid back. Meanwhile, your costs and pressures mount during an emotive time.

Now, imagine the same situation under the new rules. You can withdraw your super funds and have some quality of life. Life won’t suddenly turn into a fairy tale, but life will certainly be easier. You won’t have anything to leave your family but at least you won’t leave them with a financial burden. Instead of spending time trying to figure out how to keep you going, you and your family can actually spend quality time together.

This is the difference a small change in the superannuation rules can make.

Of course, the responsibility to care for ourselves and our families still fall on our own heads. This article certainly isn’t suggesting that policy changes will be the savior of the day, and we should push for it. It is so important that when allocating your financial resources you can prioritise appropriately so you don’t have to rely on changes in government policies.

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