Combating illegal early release of super

The ATO is warning people to steer well clear of schemes that promise early access to superannuation.

ATO Deputy Commissioner for Superannuation, Neil Olesen says these schemes typically involve the use of a bogus self-managed super fund (SMSF). He said that the schemes are illegal and attract severe penalties for promoters and participants including fines and even jail.

"Most significantly, participants run the risk of losing much of, if not all their super.

"Super is meant for retirement so there are special rules about how it's managed and when it can be accessed," Mr Olesen said.

The ATO has significantly strengthened the regulatory environment around SMSFs to protect retirement savings from illegal early release.

"In January, we introduced changes to the registration process to help prevent SMSFs not established for the sole purpose of providing retirement benefits, from making it onto the Super Fund Lookup (SFLU) website," Mr Olesen said.

"During the registration process, risk checks are conducted and the SMSF will only be displayed on SFLU once all checks have been completed and no flags raised.

"When we identify 'high-risk' trustees the fund is suspended and further compliance checks are undertaken.

"All new SMSFs are displayed on the SFLU with a new status of 'registered - status not determined' until we are confident that all is above board with the fund's operation.

"This status will only be updated once the fund has been audited and has lodged it's first annual return.

"At this time the SMSF is assessed as 'complying' or 'non-complying'," Mr Olesen said.

A new version of SFLU went live in May this year to improve its useability.

"As part of this change, we also introduced a new SFLU domain name, Link," Mr Olesen said.

"This change reinforces the key role this website has in providing industry with the regulatory and compliance history of funds.

"Later this year, the ATO will implement a SMSF member validation process that will provide greater transparency around rollovers from other funds into SMSFs.

This change will mean that funds making a rollover to a SMSF can check that the individual requesting the rollover is actually a member of the SMSF.

"Changes made to date have been well received by the super industry and the ATO is committed to continuing to work with them to identify and stop illegal early release of super," Mr Olesen said.

For more information on legal and illegal access to super, visit the ATO website at

What are self-managed super funds (SMSFs)?

SMSFs enable an individual or up to four individuals to be both responsible for and the trustee of their own super fund. They need to comply with the Superannuation Industry Supervision Act (SIS) and make their own investment decisions. Failure to comply with the rules, regulations and trustee obligations can result in the fund losing its 'complying' status which can result in a hefty tax bill. Significant penalties including fines and jail can also apply. Unfortunately, some schemes use SMSFs to illegally access super.


The global financial crisis hit Bruce and his bakery hard. Sales had declined dramatically and Bruce was struggling to pay his business debts and he was getting further behind in his mortgage repayments.

Then Bruce saw an advertisement which said he could access his superannuation. He dialled the number of the promoter in the advertisement and agreed to roll over his super into a self-managed super fund the promoter helped him establish. It cost Bruce approximately $2,500 but a small price he thought to access funds that would save his business and his home.

Bruce's life appeared to be back on track until he received a letter from the ATO. It said that Bruce had illegally accessed his super.

As a result, the ATO imposed a high rate of tax on the super Bruce had accessed plus additional penalties. Bruce was now in further debt than before and he no longer had any savings for his retirement.

    Last modified: 04 Aug 2010QC 28250