The ATO has encouraged superannuants to report individuals who encourage them to use an SMSF to gain illegal early access to their retirement savings without satisfying a condition of release.
“If someone is telling you [it is possible] to get access to your super early through an SMSF, I would be very wary of that advice, particularly if they are offering to do it for a hefty cut of the superannuation [benefit] that you might take out,” ATO superannuation and employer obligations deputy commissioner Emma Rosenzweig said during a recent media interview.
“I’d encourage anybody who is aware of that [type of] behaviour, or who has had a promoter approach them, to report that to the ATO and you can do that by searching [for] the tip-off form on our website.”
Rosenzweig confirmed the regulator is making a concerted effort to crack down on the promotion of illegal early access schemes and is working closely with the Australian Securities and Investments Commission and state and federal police.
She noted it was not just bad advisers and scheme promoters driving illegal early access activity, acknowledging the temptation of having assets under their control, albeit in a different structure, was too much for certain people to resist, particularly if they are experiencing financial difficulty.
To this end, she emphasised SMSFs may not be appropriate for some individuals.
“One of the things we say is if you think you’re a person who might be tempted to access your retirement savings [early] if you’ve got access directly to it, then perhaps a self-managed super fund is not the right mechanism for you,” she advised.
Further, she pointed out early access to SMSF benefits by way of a loan to a member or relatives is illegal and revealed the material impact this type of activity was having on the superannuation industry.
“We saw in the work we did that around $200 million a year of loans is occurring. Pleasing a lot of that was paid back, but it still amounts to a contravention that your auditor will report to the ATO if it’s occurred,” she warned.
The regulator has also called on the financial advisory sector to play an active role in eliminating the illegal early access of retirement savings benefits.