The Barefoot Investor has warned Australians against dipping into their super to pay for cosmetic procedures, arguing it could leave them worse off in the long run.

Scott Pape wrote in his weekly column that he was shocked when a friend told him he’d spent $40,000 on a hair transplant.

While his friend paid for it himself, Pape noted that more Australians are being urged to access their super early on compassionate grounds to fund similar treatments. 

Some clinics now market hair transplants and other procedures as mental health necessities, with Pape sharing one concerning example.

'Thinking about a hair transplant but the cost is holding you back?' an advertisement read.

'You may be able to access your superannuation on compassionate grounds to fund your treatment.'

Pape warned that many Australians underestimate the real cost of taking out super early, particularly the decades of lost compound returns.

'Factor in the tax on early withdrawal and decades of lost compound interest, and that $40,000 procedure can quietly turn into a $200,000 mistake,' he said.

In 2024, over 90,000 Australians applied to withdraw super early on compassionate grounds, with more than $1billion released, mostly for medical reasons.

Businesses pushing expensive or unnecessary surgery through super are now facing increased scrutiny.

While some treatments may genuinely warrant early release of super, Pape said many fall into a grey area, particularly those justified under mental health grounds.

'Getting bum fluff sewn into your head and calling it a mental health necessity is a stretch,' he wrote.

He said the core issue is about trade-offs. Super is designed to grow for decades, and any withdrawal today can significantly shrink the retirement balance.

Pape said the people most at risk are Australians who can't afford these procedures upfront and are tempted by the idea of easy access to their super.

'One day they'll stop working,' he wrote.

'One day they'll have to start living off what's left. And if they've been dipping into it early, that moment will arrive with less than they thought.'

Earlier this year, the Australian Taxation Office (ATO) and the Australian Health Practitioner Regulation Agency (Ahpra) warned about 'predatory practices'  targeting vulnerable Australians.

'It is unacceptable for anyone to pressure Australians into accessing their superannuation savings early to pay for overpriced or unnecessary treatments,' ATO Deputy Commissioner Ben Kelly said.

He stressed that super is designed for retirement and should only be dipped into early in rare cases.

'Superannuation is a long-term investment designed to be used during retirement. Accessing your super early carries long-term financial risks and can cut into your retirement savings.'

Kelly added that compassionate release is a vital safety net, but should only be used when truly necessary.

'It should only be considered as a last resort and only when it is really necessary.'