ATO on the lookout for suspicious superannuation activity

The Australian Taxation Office (ATO) has made it clear that it will continue to crack down on people who attempt to illegally release their superannuation early.

Speaking at a conference to the Self-Managed Super Fund Association, ATO assistant commissioner Justin Micale explained that last year had seen unprecedented figures of people trying to illegally access their superannuation, and that it was still a major concern for 2021.

Mr Micale explained that people regularly tried to establish an SMSF to gain early access to their super, but that the ATO monitored the number of registrations and was able to detect suspicious activity.

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“The illegal release of super is a continued area of concern for the ATO, which is why we pay close attention to new registrants in the SMSF system,” Mr Micale said.

He explained that the two areas of suspicious activity the ATO monitored were individuals accessing their own super before a condition of release was met (illegal early release of super) and criminals using stolen identities to illegally access another person’s super.

Mr Micale explained that the ATO looked for fluctuations in the number of people looking to set up an SMSF to gain early access to their super and whether these could be attributed to certain economic conditions at the time.

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“During March and April of last year we saw a 35 per cent and 16 per cent increase in registrations of new SMSFs compared to the same time the year before,” Mr Micale said. “This spike in registrations coincided with the onset of the pandemic, a period where share markets dropped and fears over job security increased.

“Then in May, when individuals could apply for the early release of super and small businesses were accessing the Cash Flow Boost, SMSF registrations decreased by 20 per cent compared to May 2019.

“Now I’m nowhere near implying that everyone who registered an SMSF during the March and April period were looking to illegally access their super. We know that a number of APRA funds had taken a significant hit due to the stock-market crash, and as a result some individuals were looking to get more control of where their money was being invested.

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“However, … we do pay close attention to new registrants and this is done through our ‘secure front door’ program.

“Maintaining a secure front door means we risk assess every individual that is linked to a newly established SMSF, and every individual that seeks to join an existing SMSF.

“Our risk model, which is becoming increasingly sophisticated, uses a series of attributes to identify individuals who may be trying to enter the system for the wrong reasons.”

Mr Micale explained that new registrations for SMSFs had jumped by 7 per cent in 2020 (22,000 compared to 20,400 in 2019).

Of the 22,000, 20 per cent were picked up by the ATO’s risk models and reviewed, and a number of those were deemed to be too high risk and they were stopped from registering an SMSF.

“This resulted in an estimated $126 million in retirement savings being stopped from being rolled out of an APRA regulated account and rolled into an SMSF where potentially it could have been illegally accessed,” Mr Micale explained.

The ATO is also working to strengthen its detection of identity fraud when it comes to suspicious superannuation activity.

Mr Micale said attacks on people’s retirement savings were becoming more sophisticated.

“Identity fraud can involve the use of stolen identities to fraudulently set up a new fund so that it can receive payments and rollovers from genuine APRA or SMSF accounts,” Mr Micale said. “These criminals then seek to steal people’s retirement savings.

“In the first six months of this financial year, we have identified 18 stolen identities being used to try and set up 12 SMSFs targeting nearly $2 million of super.”

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Written by Ben