Time to read : 3 Minutes
The Australian Taxation Office has warned it is cracking down on anyone illegally gaining early access to super, following revelations of a dramatic spike in withdrawals.
With more than five months remaining in this financial year, the number of people disqualified for illegally accessing their super early has already exceeded the total number penalised in the entire 2021–22 financial year.
ATO assistant commissioner Justin Micale says this type of activity has become the focus of its Self-Managed Super Funds (SMSF) enforcement team.
“We’ve increased the number of trustees that we’ve disqualified,” he said. “We’ve also imposed superannuation administrative penalties and, where members have withdrawn those amounts, we’ve ensured that they’ve paid additional tax penalties and interest on those amounts illegally withdrawn.”
Read: Explained: How to access your super before 65
So far in the current financial year, more than 280 trustees have been disqualified for illegally accessing superannuation, with the ATO handing down $2 million in administrative penalties and collecting $4 million in additional tax.
In the entire 2021–22 financial year, about 250 trustees were disqualified, total penalties were $3.4 million and additional tax $2 million.
Penalties for trustees who knowingly breach the rules relating withdrawals can be severe. SMSF trustees who knowingly allow illegal access to super can incur penalties of up to $504,000 and can be jailed for up to five years. For corporate trustees, fines can be as high as $2.52 million.
The ATO crackdown comes less than three years after a spike in fraudulent withdrawals during the early months of the pandemic. The Australian Federal Police charged a number of people who fraudulently exploited the early release scheme designed to assist Australians impacted by COVID.
Read: How to set money goals like a financial planner
Access to your superannuation prior to reaching your preservation age (which depends on your year of birth) is allowed in some circumstances, such as severe financial hardship or on compassionate grounds.
However, Mr Micale says the ATO has identified a number of unscrupulous operators promoting illegal early access schemes, with people under financial pressure their targets.
“These promoters often are targeting vulnerable people under financial pressure, and perhaps with low financial literacy, to encourage them to go down that path,” he said.
He added that the ATO was working in conjunction with various law enforcement agencies to identify those promoting illegal early access schemes.
The ATO’s focus has also been on prevention in the past 18 months, he said.
Read: Here's how you can start beefing up your super
“We do have a preventative process in place, which is where we risk assess all SMSF registrants to ensure that we’ve got trustees entering the system for the right reasons,” he said.
But he warned that anyone looking to invest their super or attempting or access it early needed to exercise caution when selecting an investment manager.
“Our message for people broadly is they need to be extra vigilant; they need to do their due diligence. They should be checking when they’re getting financial advice, they’re getting it from a registered financial adviser.”
This article first published on YourLifeChoices and republished with permission.
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
