ATO issues warning over illegal super scheme

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The Australian Taxation Office (ATO) is warning Australians of scheme promoters that promise to allow you to withdraw your superannuation early, and illegally.

You can withdraw your super when you turn 65 (even if you haven’t retired), when you reach preservation age and retire, or under the transition to retirement rules while continuing to work.

You can only access your super early under circumstances that mainly relate to specific medical conditions or severe financial hardship.

As the regulator of the super system, the ATO is taking action to shut down promoters who tell people they can gain access to their super before they are eligible to by setting up a self-managed super fund (SMSF), which is illegal.

The ATO recently took action against a NSW woman in the Federal Court for her role as a promoter and facilitator of an illegal early release of super scheme.

The woman was not a registered tax agent or financial adviser but assisted 68 individuals in the establishment or intended establishment of 35 SMSFs.

In many cases, she charged a fee for clients who were not yet legally entitled to access their super, to transfer their funds from an APRA regulated fund to a SMSF, so they could withdraw it, sometimes as soon as the same day.

Instead of having their super available for their retirement, the people involved reportedly used the money to fund a number of personal expenses such as home renovations and stamp duty.

The ATO took immediate action to shut down the scheme, with an interim injunction to stop the woman from promoting it further.

The court ordered a financial penalty of $220,000 and she received an injunction that bans her from setting up SMSFs for a further seven years.

“Schemes like this cause considerable financial disadvantage to people who can least afford it,” assistant commissioner Dana Fleming said.

“It’s not just the money they won’t have at retirement. People who access their super illegally may also need to pay tax on the funds they illegally accessed, along with penalties and interest.

“If you come across a tax or super scheme and you’re not sure it’s okay, get a second opinion. There are simple checks you can undertake yourself, or you can talk to a registered tax professional for sound advice.”

You can report suspected schemes and promoters at ato.gov.au/tipoff or call 13 10 20.

Have you ever been approached by someone promising early access to your super? What did you do about it?

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Written by Ben

16 Comments

Total Comments: 16
  1. 0
    0

    You can also take out your super if your balance is below $200. I regular advice young people with low balances to take out their super and have a night out otherwise they will get nothing when the fees erode their balance to zero.

    • 0
      0

      good advice. I guess there is little resistance to cleaning out the account for what is virtually a free knees-up.

    • 0
      0

      Yes – that’s why accounts below a threshold need to be quarantined from costs and fees.. waste of time anyway.

    • 0
      0

      If a person regularly changes jobs, the new employer is obliged to give them a choice of super funds they have the Super Guarantee deposited into. This can then grow the account they already have.

      If a person has many accounts, they can roll them all into one account and use that account only.

      The money is for retirement, not for blowing it on a big night out!

    • 0
      0

      Yes I know you can consolidation super funds. However most of the people I advise only have one with a very low balance. Blowing it on a big night out is much preferable than it all being eaten up in fees with zero left for retirement.

  2. 0
    0

    Two born every minute – some scammer who will take advantage, and one fool who will follow blindly..

  3. 0
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    What a pity the ATO didn’t take early action on the government’s Robo debt scam in which it is implicated by supplying data..

    • 0
      0

      Robodebt caught out many more welfare cheats than innocent people who had the opportunity to justify that they had done the right thing. However in this country we have the silent majority and a few very loud people who even though things get fixed want to whinge to the media and anyone who will listen.

    • 0
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      VCBB Can you tell us where the statistics are that support your claim? The government doesn’t even know yet how many people it has to refund so how can such a claim be made?

    • 0
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      VCBB, Stop defending the government, the professionals at News Corporation do a much better job, making unsubstantiated statements just weakens your opinions.

    • 0
      0

      the Robodebt algorithm simply compared data advised to the agencies using the same averaging rules as with the manual calculations. It just did them much faster and removed the human oversight for reasonableness checks. There is little doubt Robodebt would have caught out a higher number of cheats but the question should be did Robodebt catch out the same or higher percentage of cheats and was the proportion of erroneous claims resulting in refunds the same or lower as the manual system?

  4. 0
    0

    Yep! How true. A long time ago my first wife said it was OK to do this….her “best” female friend ( IQ of 3) assured her. I said “no” and gave reasons but was considered an idiot. Had to “repay” the super amount later to avoid hassles. Sigh. Glad I’m out of that relationship!

  5. 0
    0

    You have to be able to prove you have financial hardship including what you have legal obligations to pay then. e.g. mortgage and almost losing home, almost losing business, selling surplus vehicles to help reduce debts etc. You have to fill out numerous forms and submit them to your Superannuation Company. Don’t wait too long to apply as it can take weeks before you get the funds.

  6. 0
    0

    You have to be able to prove you have financial hardship including what you have legal obligations to pay then. e.g. mortgage and almost losing home, almost losing business, selling surplus vehicles to help reduce debts etc. You have to fill out numerous forms and submit them to your Superannuation Company. Don’t wait too long to apply as it can take weeks before you get the funds.

  7. 0
    0

    You have to be able to prove you have financial hardship including what you have legal obligations to pay then. e.g. mortgage and almost losing home, almost losing business, selling surplus vehicles to help reduce debts etc. You have to fill out numerous forms and submit them to your Superannuation Company. Don’t wait too long to apply as it can take weeks before you get the funds.


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