26th Jun 2018
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ATO warns of super scammers targeting retirement savings
Author: Ben Hocking
Super scammers target savings

Workers are being targeted by scammers encouraging them to illegally access their retirement savings.

The Australian Taxation Office (ATO) says it has become aware of people in some suburban areas of Australian major cities attempting to encourage others to illegally access their super early to help them to purchase a car; pay debts; take a holiday or provide money to family overseas.

ATO deputy commissioner James O'Halloran has warned people to be on the lookout for these word-of-mouth scammers, who could not only cost workers their super but leave them with a significant fine.

"Attempting to access your super early in this way is illegal, and people need to be aware of the financial dangers of falling prey to these promoters,” Mr O’Halloran explained.

“These people could cost you a big part of your hard-earned retirement savings.”

The ATO says it has seen evidence of promoters promising that they can organise access to super (for a fee). They ask people to fill out blank forms and provide identity documentation, while assuring people that these arrangements are legitimate.

The promoters then set up self-managed superannuation funds (SMSF) for workers and roll their APRA-regulated funds into them.

The victims then pay the promoter a fee from the self-managed fund before being encouraged to use the money for everyday use.

The activities are illegal, and the promoters can be prosecuted by both the ATO and the Australian Securities and Investments Commission.

So far, the ATO has seen promoters targeting people with small to medium super balances, people involved in local community and cultural groups, and those who may not have engaged with their super at all before being approached.

“While we have seen these promoters using word of mouth and focused in some geographic areas, such as Western Sydney, and among some communities, we believe it is not widespread at this stage – but it is important for the ATO to get this warning out as early as possible, given the significant loss people could face to their retirement savings,” Mr O’Halloran explained.

Money withdrawn from an SMSF is treated as assessable income and taxed at the account holder's marginal tax rate.

The victim will also be slugged with an administrative tax shortfall penalty of 75 per cent by the ATO and disqualified from being a trustee for their SMSF. There is also a fine for illegally accessing a superannuation fund (see the case study below).

Under Australian law, workers can generally only legally access their retirement savings once they turn 65 or if they're born before 1 July, 1960, at 55, which is called preservation age.

Preservation age increases by one year, every year, up to the maximum of 60 for those born after 30 June, 1964.

Case study
John is 52 years old and a member of an APRA-regulated superannuation fund, to which his employer makes contributions. He has a super balance of $60,000.

John has outstanding bills and he wants to send money to support his family who live overseas; however, he can’t afford to do any of this.

A friend at work tells him he knows a person, Mark, who can help access his superannuation for a fee. John is interested so he meets with Mark.

Mark reassures John that it is okay to access his super and all he has to do is set up a self-managed superannuation fund (SMSF) which he can do for him for a fee of $1000.

Mark asks John to sign some blank forms, including:

  • a roll-over form for his APRA-regulated fund
  • an SMSF trust deed
  • a trustee declaration
  • an application to open an SMSF bank account
  • an investment strategy, and
  • an election to become a regulated SMSF with the ATO.

John also provides copies of his driver’s license and some other personal identification to Mark.

Mark sets up an SMSF for John and rolls over the $60,000 from his APRA regulated super fund.

John then starts drawing money out his SMSF bank account to pay bills, including the $1000 to Mark for his services and to send money overseas to his family to help them out.

Since John was not eligible to access his super early, the $60,000 that he withdraws from his SMSF is treated as assessable income by the ATO and John is taxed at his marginal tax rate.

The ATO also applies an administrative tax shortfall penalty at 75 per cent for intentional disregard of the law, which is approximately $15,000. They also disqualify John from being a trustee of his SMSF.

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    COMMENTS

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    Old Geezer
    27th Jun 2018
    10:34am
    This scam has been around for many years now well before the GFC.
    Cowboy Jim
    27th Jun 2018
    11:34am
    There is one going round purportedly from Centrelink, telling me about an increase in pension payments. Cold call on landline, Aussie voice at the other end. Put the phone down.
    Old Man
    27th Jun 2018
    11:32am
    I wonder what action has been taken against Mark, the shyster who made a quick grand for very little work. I am like a high percentage of people who have no idea about the legalities of how super actually works and if someone like Mark has the forms, the glib chat and an assurance that it is all legal how am I to know that I am breaking the rules. Sure, ignorance of the rules is no defence and I will need to pay but Mark is the one who should be in the sights of the ATO.
    Rosret
    27th Jun 2018
    12:51pm
    I think you will find they do have their sights on Mark. However offline crime is harder to track.
    What should be more difficult is people withdrawing their super when its apparent they are breaking the rules.
    morrowj1122
    27th Jun 2018
    12:07pm
    Yes OG.....my wife got caught out in 2002 and wouldn't listen to me. I had to repay the entire amount that was scammed.


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