ATO on the hunt for illegal super withdrawals

The Australian Tax Office (ATO) has issued a warning about illegal early withdrawals from super funds.

Assistant commissioner Justin Micale told the Australian Financial Review that illegal early withdrawals from self-managed super funds (SMSF) were a constant concern for the ATO. And anyone who thought they had got away with it during the confusion over COVID early withdrawals might want to consider their options.

Mr Micale said that while the ATO’s compliance activities for SMSFs were put on hold during the pandemic to focus on education and support, it had scaled up its investigations in the new year.

Of particular concern to the ATO is anyone who promotes early access to super by transferring into a SMSF.

Read: The risks of drawing super early

The ATO says such schemes are illegal and heavy penalties apply, as Ahmed Saad, of Glenroy, Victoria, found out.

In November 2021, Mr Saad was convicted by the County Court of Victoria of one count of obtaining financial advantage by deception and one count of attempting to obtain financial advantage by deception.

Mr Saad was sentenced to nine months’ jail for the first count and one month’s jail for the second, to be served concurrently, after he facilitated unlawful early access to superannuation.

According to the Australian Securities and Investment Commission (ASIC), Mr Saad operated a scheme, beginning in October 2016, in which he provided his clients with illegal early access to their superannuation.

READ: Super outlook for 2022

ASIC stated that between 11 November 2016 and 13 October 2017, Mr Saad obtained $1,531,925 on behalf of 168 clients. Between 11 August 2017 and 11 October 2017, Mr Saad attempted to obtain a further $92,400 on behalf of 10 clients. Mr Saad indirectly benefitted from the scheme by growing his client base.

The case was referred to the courts by ASIC and its deputy chair, Sarah Court, said the sentence demonstrated the seriousness of such misconduct.

“Facilitating the unlawful early release of superannuation can lead to the erosion of people’s super balances, which has the potential to lead to long-term hardship,” Ms Court said.

In December 2018, ASIC also permanently banned Mr Saad from providing financial services.

SMSF trustees also face hefty penalties for illegally accessing super. The ATO says that as well as facing higher taxes and disqualification, trustees can incur penalties of up to $504,000 and jail terms of up to five years, or fines of up to $2.52 million for corporate trustees.

READ: When does your super count as an asset

And get those tax returns in early.

Paul Rafton, superannuation national leader for BDO Australia, an accounting, tax and consulting group, told the AFR that late lodgement was one of the ATO’s triggers for launching an investigation into a SMSF.

“The ATO tends to focus on those that are late or have a late lodgement history because it is of the view that they are late lodging for an unfavourable reason,” Mr Rafton said.

There are some strict rules for withdrawing your super early since the COVID early release program closed in December 2020.

Generally, its only possible for specific medical conditions or severe financial hardship.

Special circumstances include: compassionate grounds, severe financial hardships, a terminal medical condition, temporary incapacity, permanent incapacity, when super is less than $200, if you are a temporary resident departing Australia.

Have you withdrawn your super early? Do you regret it or did it improve your life? Tell us how in the comments below.

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Jan Fisher
Jan Fisher
Accomplished journalist, feature writer and sub-editor with impressive knowledge of the retirement landscape, including retirement income, issues that affect Australians planning and living in retirement, and answering YLC members' Age Pension and Centrelink questions. She has also developed a passion for travel and lifestyle writing and is fast becoming a supermarket savings 'guru'.
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