Illegal early access to super: it's not worth the risk

Two prominent superannuation industry leaders share their thoughts on the pitfalls of illegal early access to super schemes, and the steps taken by regulatory agencies to stop it.

Andrea Slattery, CEO of Self-Managed Super Fund Professionals' Association of Australia (SPAA).

Pauline Vamos, CEO of the Association of Superannuation Funds of Australia (ASFA).

What risk do you think illegal early access represents to the integrity of the superannuation system?


It's an issue for the whole industry, not just self-managed super funds (SMSFs).

Illegal early access occurs on a number of fronts. Promoters are out there encouraging individuals to establish sham SMSFs from which money is ripped out of the system. There is also ID fraud where people have their super savings raided by criminals as fake documents support fake conditions of release. Then there are those SMSF trustees seeking to use the money in the fund for a personal or business reason, in fact using the fund as some form of credit facility.

The risk is that all these illegal early access schemes have the potential to destroy the integrity of the system. It cannot be understated.

The system works because super is a long term investment for which generous tax concessions are provided.

The early access promoters, the ID theft, some SMSF trustees using their fund as a personal bank account, if all left unchecked, have the potential to influence the way ordinary Australians view the long term requirement of super savings.

It's good to see that the Government has supported the Cooper recommendations to beef up the penalty regime to discourage schemers and participants of illegal early access schemes.


While the risk to the superannuation system is largely confined to opportunistic 'scheme promoters' the issue of illegal early access is one which represents a significant reputational risk to the entire superannuation system.

SPAA has been assisting the ATO and the Australian Prudential Regulation Authority (APRA) on the development of the ATO SMSF member verification service. This is aimed at ensuring member security and system integrity when funds are rolled over from an APRA fund to a SMSF.

We also note that via its response to the Cooper Review, the Government will require proof of identity checks for all people joining a SMSF whether they are establishing a new fund or joining an existing fund.

SPAA continues to work with regulators on their development of other initiatives to improve member security and system integrity such as bank account verification and the use of the tax file number as the single identifier.

What would you say to people thinking about accessing their retirement savings early?


Opportunistic scheme promoters, who prey on vulnerable people and persuade them to access their super early (so the promoter can earn an excessive commission or access the savings) should be prosecuted. We are pleased that the Government's response to the Cooper Review includes civil and criminal sanctions for illegal early release scheme promoters.

That said, we are all ultimately responsible as individuals for the financial decisions we make. Unfortunately, scheme promoters will always be with us in one form or another. People should also ask themselves 'what is in this for the person telling me I can access my super early?'

On the education front, SPAA has recently launched a SMSF trustee education curriculum guide to encourage development of SMSF trustee training. We expect to see more courses become available for trustees who want to learn about their roles and responsibilities. The Government response to the Cooper Review will also provide the ATO with the power to penalise the trustee for breaches, including illegal early release, and there is to be compulsory education for any trustee who breaches.


Nothing good comes from illegal early access.

If you're an individual illegally accessing your super you run the risk of not only some hefty fines if caught, but also denying yourself what might have amounted to be a reasonable benefit in retirement. This in turn could have a significant impact on your standard of living once you stop working.

Not only are these individuals impacting their future, but they could find themselves facing fines today that, when combined with the 'commission' charged by the promoter, leaves very little available for immediate consumption.

If you're a SMSF trustee seeking to use the money in the fund for a personal or business reason, you're looking to break the law. The SMSF is not some form of emergency credit line. There are some serious penalties that apply to trustees who contravene the rules.

As well as the risk of prosecution or being disqualified - both of which could impact future employment prospects - trustees risk losing close to 50% of the assets in the fund if the fund is made non-complying.

For those who have already accessed their super where they didn't know the rules, the sooner the matter is resolved the better. ASFA would advise anyone involved in illegal early release, either through a promoter or through their SMSF, to enter into a dialogue with the ATO as soon as possible.

When a fund sends an election to become regulated the ATO conducts checks during the registration process. In some cases this may cause delays in the registration process. What will this mean to the SMSF market and APRA regulated funds?


ASFA welcomes the changes to the registration process recently introduced by the ATO and acknowledges that these changes strengthen the integrity of the process.

The registration process was something that needed attention. The slight delay associated with the new process allows the ATO some valuable time to perform other checks and ASFA understands that hundreds of suspect registrations have been prevented as they failed the integrity checks that the ATO applies.

From a SMSF perspective the new registration process goes a long way to taking away the doubt as to the bone fides of the SMSF when APRA funds transfer benefits. The impact on the many legitimate SMSF registrations should be minimal.

From an APRA fund perspective the new registration process is all about adding confidence and safety to the system. APRA fund trustees take their jobs very seriously and the new process adds a much-needed layer of integrity to the registration process. It also facilitates a better rollover process.

ASFA has encouraged all APRA regulated funds to engage with the new process.


There may well be minor delays as the new ATO SMSF member verification process is bedded down. However, SPAA believes this is a small price to pay to ensure the ATO can make the necessary checks to ensure member security in the rollover process.

What are you doing to detect and stop illegal early release of superannuation?


We are continuing to work with the ATO and others to ensure that establishment of a SMSF is a transparent and secure process, and is used by those with a genuine desire to manage their own super. We also look forward to the development of measures such as bank account verification with regard to SMSF rollovers, which SPAA has also been advocating for some time.

Finally, as already mentioned, we have launched a trustee education curriculum guide and continue to advocate for higher standards for SMSF advisers.


As an industry association, ASFA sees its role to alert our members to the issues and to provide them with the tools to assist them to deal with the situation.

To this end we've worked closely with the ATO and issued messages to our membership warning of the prevalence of promoters and reiterating to our many service provider members who service SMSFs that they too need to be diligent.

ASFA's SuperGuru website also contains warnings directed to individuals who might be targeted in illegal early access schemes.

On 16 December 2010, the Government announced the introduction of the Stronger Super package, which will make our super system stronger and more efficient.

For more information about the Stronger Super package, visit

    Last modified: 18 Jan 2013QC 28254