Title: How Bureaucratic Systems Interact To Create Bad Outcomes
Date: 2026-07-28 07:22
Modified: 2026-07-28 07:22
Category: Policy
Tags: bureaucracy, healthcare, superannuation, child-care-subsidy, australia
Slug: bureaucratic-systems-bad-outcomes
Authors: Andrew Ridgway
Summary: A parent's account of how Australia's health, tax and welfare systems interact to penalise families who access their superannuation for essential medical treatment for their children.

This is going to be a long blog post. I do not normally air complaints this specific publicly, but in this day and age it seems to be the only way to get people to stand back from their own processes and rules and sit down and actually listen to how a system works in reality. The long and short of it is that we have a compassionate release of superannuation system that is neither compassionate nor understanding, and is actively generating worse outcomes than the failure it was designed to address. 

I recently had to deal with something no parent enjoys. My child injured her knee to the point it required surgery. She was just getting into rugby and doing some amazing things to get on top of her health, and we were faced with the unenviable choice that comes with this scenario in Australia: public or private health. What follows is the journey that happens when you try to use private health in Australia to get better outcomes for your child. We are going to look at the interactions between the private and public health system, the Australian Taxation Office and the compassionate release of superannuation system, and how that release then interacts with the Child Care Subsidy and Human Services system.

This blog post is accompanied by emails from the respective Ministers and my local representative. It is the last attempt to have someone actually listen, rather than send canned emails that treat me like a child who did not do any prior research.

I would like to note that Ali France, my local MP, has reached out to me to ask for my story to assist with her work in the House of Representatives Standing Committee on Health, Aged Care and Disability on improving access to specialty doctors. If that committee work is something that matters to you, they are accepting submissions at the Department of Health and Aged Care consultation page on specialist affordability and access. You can see it [here.](https://www.health.gov.au/our-work/consultation-on-specialist-affordability-and-access?language=en). It's a step in the right direction to at least shine a light on the problem but I won't hold my breath for any concrete outcomes.

To work through this, I am going to put together a timeline. The first section covers the initial event and the health care received. The second covers the tax event and its fallout. The third is an analysis of how the three systems interact to create a terrible outcome. The full correspondence is reproduced as an appendix for reference.

Before we get into it, while I have complaints about the systems involved, I want to highlight that the surgeon was always upfront and provided exemplary care. This is by no means a complaint about her, and we could not have asked for a better clinical outcome for my daughter. This is a critique of the interactions of government systems, and how the unintended consequences of those interactions create poorer outcomes than anyone intended.

## Section 1: Timeline of the initial event and the health care received

**June 2024**

My daughter had an incident at school resulting in a serious knee injury. We attended a local emergency department, where the leg was splinted and we were referred back to our GP. We were told at this point that an injury like hers would take between twelve and twenty four months to be triaged in the public hospital system. That is simply unacceptable. She had put in some fantastic work to get on top of her health, and adding twelve to twenty four months on top of the recovery time would have created bad outcomes in their own right. On that basis, we opted to go private.

This is the first key failure of the health system. It is not being proactive, and by reacting in this way to an acute injury it would have created comorbidities in my daughter that would likely have made her a much larger ongoing drain on the health system. The public health system may as well be called the "let's make it worse" system at this point, because that is the practical effect of the wait.

Our GP asked who we would like to be referred to. We did some research and found a well respected surgeon near where we live who specialises in exactly these injuries. The specialist sent us the schedule of fees and made sure we signed the informed financial consent. The fees were high, but we had opted to go private, we knew this would be the case, and we got her in to see the specialist.

**July 2024**

It was confirmed that she needed surgery. Our specialist sent through the financials. The total was expensive. After Medicare, which covered a measly one thousand dollars, there was another six thousand dollars for the surgeon and another one and a half thousand for the anaesthetist, let alone the other costs associated with the procedure. We understood this was expensive, but we believed it would create the best outcomes for our daughter, and we signed the informed consent for surgery. Private health insurance thankfully covered the hospital fees, which would otherwise have added tens of thousands to the final cost.

I asked the specialist if she would access the gap, as we had done before with other surgeons. She told us that she does not participate in that system, because it would mean she makes at best half of her fees, which barely cover her insurance, hospital and usage costs. At this point, I realised that both the public and the private health systems were failing us, and that to get something approaching adequate care we were going to have to stump up our own money, even after putting tens of thousands in each year via the Medicare levy and private health premiums.

I remembered hearing about the release of super for medical reasons, so I looked up the policy. We accepted that this would adversely affect my income tax for the year, but we ran the numbers and concluded it was still cheaper than a personal loan of eight thousand dollars to cover the costs. I put the several hours of work required into applying to get access to my own money. The application was approved.

**August 2024**

My daughter had the surgery. We paid the specialist and the other consultant fees using the money released from the early release of superannuation.

**October 2024**

My daughter began rehabilitation.

**November 2024**

I did the 2023-24 tax return with my accountant. Superannuation was not yet included, and we had a normal tax season.

**April 2025**

My daughter started the 2025 rugby season. She was unfortunately not able to play, but she participated in training. That was only possible because she had the surgery in the private health system. Had we gone down the public path, we would still have been waiting for surgery at this point.

## Section 2: Timeline of the tax event and its fallout

**June 2025**

Our assessment for the relevant financial year landed. The superannuation payout was automatically brought into my taxable income, as expected. I noted the figure and moved on.

**October 2025**

We sat down to do our tax for the year. The number popped up. Pay as you go instalments were sorted via super, and we shrugged, complained about the two thousand dollars the system had effectively charged me to get surgery for my daughter, and moved on. At that point, the pain was still manageable. It was a known cost, and we had accepted it.

**January 2026**

Our Child Care Subsidy was recalculated on the basis of our finalised tax. We did not only lose the tax money. We also lost the monthly benefit of the Child Care Subsidy, which dropped to a very low level for the year. From here, the rest of 2026 has been spent attempting to get Human Services to recognise a one-off release of superannuation as not part of our regular income, and to remove it from the income test for subsidy purposes.

We attempted the Administrative Review Tribunal, only to be told that they wanted detailed breakdowns of our budgets and income. The experience is best described as the system asking a family that has just been financially punished for doing the right thing to also hand over its private financial life for further scrutiny. I will leave the tribunal process there, because the point of this post is not the tribunal.

## Section 3: Analysis of how the three systems interact to create a terrible outcome

It is clear from the timeline that the compassionate release of superannuation is not compassionate. I put this question to the respective Ministers. Why come up with a compassionate release of super option, designed specifically to address failures of funding in health care, and then go and make sure that when you use it the release will not only cost you extra in tax but will also reduce any welfare received? (The same trap awaits people accessing it for things like cosmetic dental, where public waiting lists are similarly stretched.)

### The Letters

Read together, the three letters in the appendix paint a clear picture. The Treasurer's office confirms the design of the system. Early release is taxable, it counts as income for income tested payments, and the Government has no current plans to change that. The Health Minister's office confirms that gap cover is voluntary, that informed financial consent is the main consumer protection mechanism, and that the Government's principal response is an upgrade to a website. The local member's office acknowledges the problem, points to a committee inquiry, and stops there. At the very least they admit it needs fixing and are trying to work through it.

Not one of those letters engages with the central point of my correspondence, which is that the three systems interact in a way that punishes the behaviour the policy is supposed to encourage. The policy says: if you cannot afford essential medical treatment, you can access your superannuation. The tax system says: that access is taxable income. The Human Services system says: that taxable income will now reduce your Child Care Subsidy. The health system says: that is not our problem, talk to the insurer. The insurer says: that is not our problem, the doctor did not use gap cover. The doctor says: that is not our problem, gap cover does not cover our costs. So nothing is anyone's problem, and the family pays the difference.

To the Minister for Social Services, the lack of communication from your office is telling. To the Health Minister's office, why would you send me a response that simply repackages research I have already done and then wash your hands of the matter? To the Treasurer's office, you need to get someone with genuine training in how these systems interact to write your letters, because the response I received defended a design choice without ever addressing the interaction effect that I had specifically written to raise.

### Some broader observations

It is worth saying, for the avoidance of doubt, that none of the people I dealt with in the public service were individually unreasonable. The surgeon was excellent. The accountant was helpful. The staff in the various call centres were polite. The problem is structural, not personal. The system is built in a way that produces this outcome, and the only way to change the outcome is to change the system.

There is also a wider question here about the cost of making private care the only timely option. The official wait time we were quoted was twelve to twenty four months for the initial specialist appointment alone, before any surgery. In a young person, that delay is not neutral. It changes the kind of injury from a recoverable one to a chronic one, it lengthens the period of disability, it reduces the chance of return to sport, and it increases the lifetime cost of treatment. If the policy design of the compassionate release system is meant to relieve pressure on the public system by allowing families to go private, then the policy design of the tax and welfare systems is undermining that intent in the year that follows.

In the end, I should have just gotten a personal loan. It would have cost me less than the tax and lost benefits combined. It is disappointing that this is the case in our "World Class Public Health System™"

### Where this leaves us

I do not expect the system to respond quickly. I do not expect the letters I have published here to result in an immediate change of policy. What I do expect is that, when the relevant committees and the relevant Ministers sit down to consider how the early release of superannuation interacts with the rest of the safety net, they will have a concrete example in front of them of a family that did the right thing and was penalised for it.

If you have had a similar experience, the consultation on specialist affordability and access is open for submissions, and the Standing Committee on Health, Aged Care and Disability is accepting input. You can add your submission [here.](https://www.health.gov.au/our-work/consultation-on-specialist-affordability-and-access?language=en) If you are a policy analyst inside government, and you have read this far, then the question to take back to your work place is simple. Does any part of your work consider the interaction effects of early release, tax and income tested payments, or does each part only consider its own patch? If the answer is the latter, then this post is for you, and so is the next family that comes through the door.

## Appendix: The correspondence

What follows are the substantive letters exchanged with the relevant offices. I have reproduced them so that the reader can see exactly what was said, in the same form that it was said, and judge for themselves how seriously the substance of my concerns was engaged with.

**Letter from the Treasurer's office, via Treasury**

Dear Mr Ridgway,

Thank you for your correspondence of 19 December 2025 to the Hon Jim Chalmers MP, Treasurer, concerning the interaction between early release of superannuation and social services payments. Your correspondence has been referred to Treasury. My sincere apologies for taking so long to get back to you.

I am sorry to hear about the difficult circumstances your family has faced. Please accept my sympathies.

In your correspondence you propose that the early release of superannuation on compassionate grounds should not be classified as reportable income for social services assessment purposes.

As you are aware, benefits paid before an individual turns 60 are taxed at the lower of their marginal tax rate or 20 per cent (plus Medicare levy of 2 per cent where applicable) and are included in their taxable income. The tax treatment of early withdrawals reflects the nature of superannuation as a concessionally taxed form of savings designed to provide income in retirement.

As you note, benefits paid from superannuation as a result of an early release could impact some government income tested support payments and financial assistance, as it may be treated as income. This includes the Child Care Subsidy, which, like most government payments, is income tested to ensure support is targeted to families with the greatest need. A family's Child Care Subsidy entitlement is based on their combined annual Adjusted Taxable Income, which includes both taxable income and non-wage related remuneration.

The inclusion of the early release of benefits paid from superannuation into an individual's taxable income is appropriate given that these amounts, like salary or wages, increase the amount of income or purchasing power at a person's disposal.

Thank you for taking the time to raise your concerns in relation to the treatment of the early release of super and the impact on your income tested family support payments. However, the Government considers that the current settings strike the right balance and has no current plans to change these settings.

Once again, thank you for taking the time to write.

Yours sincerely,

Ben Murphy
Director
Retirement Income and Tax Administration Branch

**Letter from the Health Minister's office**

Mr Andrew Ridgway

Dear Mr Ridgway,

Thank you for your correspondence of 6 December 2025 to the Minister for Health and Ageing and the Minister for Disability and the National Disability Insurance Scheme, the Hon Mark Butler MP, regarding the out-of-pocket expenses associated with private specialist treatment for your daughter. The Minister has asked me to respond on his behalf.

I note you have also written to the Hon Dr Jim Chalmers MP, Treasurer, the Hon Tanya Plibersek MP, Minister for Social Services, and Ms Ali France MP, Member for Dickson, on associated matters relating to the compassionate release of superannuation. Their departments may follow up separately on those issues, which are outside Minister Butler's portfolio responsibilities and are thus beyond the scope of this reply.

I acknowledge the financial impact of out-of-pocket medical expenses and the stress associated with the suffering of a family member. I trust your daughter is recovering well.

Private health insurance and out-of-pocket expenses

I note from your correspondence that you and your family have held private health insurance for some years. Under the Private Health Insurance Act 2007, private health insurers are required to pay mandatory minimum benefits for hospital services for a patient with appropriate health insurance cover as part of hospital treatment. These benefits include at least 25 per cent of the Medicare Benefits Schedule fee, minimum accommodation benefits and minimum benefits for medical devices. Medicare contributes to the cost of hospital treatment for private patients by covering the remaining portion of the Medicare Benefits Schedule fee. It means that if a doctor charges more than the Medicare Benefits Schedule fee, it can give rise to an out-of-pocket cost.

Informed financial consent

Doctors operate as private businesses and the actual fee charged is a matter between the doctor and patient. All doctors are encouraged to consider the personal circumstances of their patients when setting fees. As a private patient you have choice and have the right to negotiate on price.

The Good Medical Practice Code of Conduct, endorsed by the Medical Board of Australia, states that good medical practice involves doctors ensuring their patients are informed about the doctors' fees and charges. This is known as informed financial consent and is important to enable the patient to make a fully informed decision about treatment options. Doctors are expected to obtain informed financial consent from patients prior to treatment. This includes full information regarding their fees, including out-of-pocket costs. If you were not given this opportunity, you may wish to register a complaint with the Australian Health Practitioner Regulation Agency, who handle such complaints on behalf of the Medical Board.

Reducing out-of-pocket costs

To minimise out-of-pocket costs for policy holders, health insurers can choose to pay more than the required minimum benefits, and many do so through negotiating agreements with doctors under gap cover arrangements. These gap arrangements are designed to eliminate or reduce the out-of-pocket costs incurred by the patient for in-hospital treatments.

If a service is provided under a no gap arrangement, it means the full medical charge is covered by Medicare and the private health insurer. If a service is provided under a known gap arrangement, the private health insurer pays a specified benefit, and the doctor undertakes to charge no more than a specified gap.

Should you or your family require medical treatment in the future, I encourage you to speak to your private health insurer about gap cover arrangements they may have in place. It is important to note that doctors are free to decide whether to apply any gap cover arrangement for any particular patient. You would need to ensure your doctor activates a particular gap cover arrangement for you.

You may also wish to visit the Medical Costs Finder, which has been developed by the Government. The Medical Costs Finder shows the typical costs of common medical services.

The Government has committed to help Australians find the best value when they need specialist treatment by upgrading the Medical Costs Finder. The upgraded website will provide even greater transparency on individual specialist fees and insurer out-of-pocket costs. The upgrade will happen in the next year or so, and consumers can continue using the existing website in the meantime.

Thank you for writing on this matter.

Yours sincerely,

Jacqualine Myint
Director, Consumers Section
Private Health Strategy Branch
Department of Health, Disability and Ageing
2 February 2026

**Letter from the office of Ali France MP**

Thank you for your email. Ali appreciates you taking the time again to share your family's experience. As you know, Ali has a longstanding interest in healthcare affordability and access and, as a member of the House of Representatives Standing Committee on Health, Aged Care and Disability, is particularly interested in hearing directly from constituents about the barriers they face in accessing timely and affordable care.

Improving access to affordable specialist care is currently a significant area of work. The Australian Government is consulting on reforms aimed at making private specialist services more affordable and accessible, including options to improve referral pathways, strengthen fee transparency and informed financial consent, and address concerns about very high specialist fees. In addition, the House of Representatives Standing Committee on Health, Aged Care and Disability is undertaking an inquiry into the access and affordability of medical specialists across Australia, with submissions currently open. Please make sure to participate, as stories like yours are needed to be heard systemically as well.

The circumstances you have described reinforce why this work is so important. Hearing directly from families who have experienced significant financial pressure to access healthcare helps inform discussions about where improvements can be made.

In relation to compassionate release of superannuation, while Ali appreciates your concerns regarding the broader financial impact, and it is well noted in your correspondence to all levels, Ali understands that this does not address the wider concern you have raised about needing to access your retirement savings in the first place to obtain essential healthcare. Agreed, let us all work together to make sure health care is accessible to all, regardless of income.

Thank you again for taking the time to write and share your experience. Ali values hearing directly from constituents on these important issues and appreciates you bringing your perspective to her attention.

Kind regards,

Jill McKay
Chief of Staff
