With tough times facing individuals, such as bank foreclosures and retrenchments, the rising cost of living pressures and mortgage defaulting, some people might get caught up in illegal schemes to take their money out of super.
Promoters of illegal schemes single out people in financial strife, retrenched workers and some ethnic communities. They may claim you can withdraw your super or use a ‘self-managed fund’ to pay off debts, make a deposit on a home, or buy a car or holiday.
To put it simply, they are lying.
Promoters of these schemes usually:
- encourage you to transfer or rollover your super from your existing super fund to a self-managed super fund (SMSF) to withdraw your super before you are legally entitled to it
- target people who are under financial pressure or who do not understand the super laws and are not aware of the consequences of involvement in a scheme
- claim that you can withdraw your super and put the money towards anything you want – which isn’t true
- charge high fees and commissions; which presents the risk of you losing some or all of your super to them
- may request your identity documents.
In the worst cases, the promoters steal all your money. In other cases, promoters demand a commission, usually taking a fifth or more of your super. They may get you to sign false statements, exposing you to fines or possibly jail. If you finally get what’s left of your money, you could have to pay the whole lot to the Tax Office in back taxes and penalties because you did not keep it until you retired.
If you illegally access your super early, the withdrawn amount must be included in your assessable income, even if you return the super to the fund later. You will have to pay additional income tax, tax shortfall penalties and interest. You may also be liable for an administrative penalty as a trustee.
If a promoter helped access your super illegally, you are not able to 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You may also be disqualified as a trustee of your SMSF if you allow super to be withdrawn from the fund early.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 cannot 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.
Fraudulent access to super is also rising. Some super fund member statements can be stolen from private mailboxes, with their information used to create false identities. Self-managed funds linked to bank accounts are then set up. Assuming a fund member’s identity, thieves contact the member’s super fund requesting that their super money be rolled into the fraudulent account. If you are concerned that this may have happened to you, contact your super fund.
Being disqualified may hurt you professionally, personally, or financially.
Contact the ATO immediately if you illegally access your super or have been involved in a scheme promoting illegal early access to your super. They will consider your voluntary disclosure and circumstances when determining any penalties.