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  • Watch out for illegal SMSF super schemers

    The ATO is warning Australians of scheme promoters that promise to allow you to withdraw your superannuation early, and illegally.

    Super is money set aside during your working life for when you retire. You can withdraw your super when you turn 65 (even if you haven’t retired), when you reach preservation age and retire, or under the transition to retirement rules while continuing to work.

    You can only access your super early under circumstances that mainly relate to specific medical conditions or severe financial hardship.

    As the regulator of the super system, the ATO is taking action to shut down promoters who tell people they can gain access to their super before they are eligible to by setting up a self-managed super fund (SMSF), which is illegal.

    The ATO recently took action against a NSW woman in the Federal Court for her role as a promoter and facilitator of an illegal early release of super scheme.

    The woman was not a registered tax agent or financial adviser but assisted 68 individuals in the establishment or intended establishment of 35 SMSFs.  In many cases she charged a fee for clients, who were not yet legally entitled to access their super, to transfer their funds from an APRA regulated fund to a SMSF so they could withdraw it, sometimes as soon as the same day. Instead of having their super available for their retirement, the people involved reportedly used the money to fund a number of personal expenses, like home renovations and stamp duty.

    The ATO took immediate action to shut down the scheme, with an interim injunction to stop the woman from promoting it further. The court ordered a financial penalty of $220,000 and she received an injunction that bans her from setting up SMSFs for a further seven years.

    “Schemes like this cause considerable financial disadvantage to people who can least afford it,” Assistant Commissioner Dana Fleming said.

    “It’s not just the money they won’t have at retirement. People who access their super illegally may also need to pay tax on the funds they illegally accessed, along with penalties and interest.

    “If you come across a tax or super scheme and you’re not sure it’s okay, get a second opinion. There are simple checks you can undertake yourself, or you can talk to a registered tax professional for sound advice.”

    You can report suspected schemes and promoters to us at ato.gov.au/tipoff or call 13 10 20.

    Last modified: 10 Dec 2019QC 60876