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natstone76(Newbie)Newbie
16 June 2025

Can someone please clarify the following -


I have been told my super fund will withhold 22% tax on the amount withdrawn as compassionate release. The drawdown amount must be declared as additional income on my tax return for the financial year.


I cant get a clear answer as to whether I will owe more tax at the end of the financial year. The ATO said it depends on multiple factors. Can someone please clarify this and what worse case scenari would look like on a drawdown amount of $17,000 for medical expenses?


Particuarily, in regards to if the $17,000 keeps me in my current tax bracket pushes me to the next tax bracket?


Thank you in advance. Trying to avoid ending up with a tax debt I cant afford.




309 views
3 replies
309 views
3 replies

All replies

JayATO(Community Support)Community Support
17 June 2025

Hiya @natstone76


Your super fund is right, there are a LOT of variables in your tax return that may change your debit/credit position.


What I can say that might help a little is if you do end up with a debt we do have payment plans available to try help alleviate the financial pressure.

AG_1(Initiate)Initiate
14 Dec 2025

Hi JayATO,


I am in a similar situation whereby the lump sum from my super will take my assessable income into the next tax bracket. In the eligibility section of the application to access super on compassionate grounds I am required to confirm that I acknowledge and understand that withdrawing super early will result in an additional amount being withdrawn from my super balance to cover any PAYG withholding tax. Does this mean that an amount will be allocated to pay for PAYG tax withholding within the lump sum payment I receive from my super fund? Can I elect to pay any tax owing at the end of the financial year without using funds in my super?

KaraATO(Community Support)Community Support
15 Dec 2025

Hi @AGATO_1,


Yes, when super is released on compassionate grounds, your super fund must withhold tax from your account before paying you the lump sum. The payment is taxed as a normal super lump sum, and any taxable amount generally counts towards your assessable income.


No, you can't opt out of PAYG withholding by your super fund. The fund will deduct the withholding from your super before you receive the money. You'll then include the payment and the tax withheld in your tax return using the PAYG payment summary superannuation lump sum your fund issues.


You can contact your super fund for their withholding rates and timing.

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