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  • Penalties for illegally accessing super early

    If you illegally access your super early, significant penalties can apply. The penalties applied to promoters who encourage illegal early withdrawal of super are even more significant.

    Members and trustees of SMSFs

    If you illegally access your super early, the withdrawn amount is required to be included in your assessable income, even if you return the super to the fund later. This means you will have to pay additional income tax, tax shortfall penalties and interest. You may also be liable for an administrative penalty in your capacity as a trustee.

    If a promoter helped access your super illegally, you cannot claim a personal deduction for any fee or commission a promoter takes from your super when they help you to roll over your super or set up an SMSF.

    You may also be disqualified as a trustee of your SMSF if you allow super to be withdrawn from the fund early. If disqualified, you are unable to operate as a trustee of an SMSF and your name will be published in both the Commonwealth Government Notices Gazette and our trustee disqualification register. This means that your disqualification will be on public record. Being disqualified may have an adverse impact on you professionally, personally, or financially.  

    If you illegally access your super or have been involved in a scheme promoting illegal early access to your super, contact us immediately. We will take your voluntary disclosure and circumstances into account when determining any penalties.

    Promoters

    The ATO and The Australian Securities & Investments Commission (ASIC) may prosecute promoters of schemes that encourage illegal early release of super. These activities may involve breaches of the following legislation:

    • Superannuation Industry (Supervision) Act 1993
    • Corporations Act 2001
    • Australian Securities and Investments Commission Act 2001.

    Breaches may include:

    • misleading or deceptive conduct
    • giving financial product advice without an Australian financial services licence.

    We may impose civil and criminal penalties, including significant fines and terms of imprisonment.

    Case study

    Strong penalty for promoter of SMSF illegal early release of super

    A Federal Court has imposed a $220,000 penalty and a seven-year ban for the promoter of an illegal early release of super scheme involving SMSFs.

    The ATO, as regulator of the SMSF sector, commenced legal action against the New South Wales woman in 2018 after a tip-off about the suspect establishment of several SMSFs.

    She had set up or intended to set up 35 SMSFs on behalf of 68 individuals between 2016 and 2018. She then helped the individuals who were not yet legally entitled to access their super, to transfer their balances to the SMSF so they could withdraw it. This sometimes occurred on the same day.

    Participants in the scheme reportedly used the money to fund a number of personal expenses including home renovations and stamp duty.

    After seeking an initial injunction that placed a number of restrictions on the scheme’s facilitator, the ATO filed an application in the Federal Court seeking declaratory relief, a final injunction, and payment of a civil penalty.

    The case is the first time we have used the Superannuation Industry (Supervision) Act to put a stop to a promoter of an illegal early release of super scheme.

    Super is money set aside to provide for your retirement. Withdrawing your super early without meeting a condition of release can result in long-term financial damage. This can leave people with little or no super for their retirement as well as a significant tax bill on the amount withdrawn.

      Last modified: 09 Feb 2022QC 18810