Danni Kirwan, Marketing Executive
The ongoing global financial crisis has left many people looking for extra cash, and in some cases as ASIC warns, attempting to gain early access to their superannuation.
Late last week, ASIC released a statement addressing the increase in the number of people trying to gain illegal early access to their super – primarily through scams involving the establishment of SMSF’s. You can read the full statement from ASIC here
While establishing an SMSF will give you greater control over how your funds are invested, there are restrictions in place that govern what you can invest your super in, and when you can draw on your super.
Despite what promoters of illegal schemes may tell you, early access to Superannuation is only granted in very limited circumstances – such as financial hardship or on compassionate grounds. If applying for early access to super fund on the basis of financial hardship for example, you must prove:
• That you have been receiving welfare benefits continuously for 26 weeks, and;
• That you are unable to meet your day to day living expenses.
If that is the case:
• You can only receive up to $10,000.00 in a 12 month period, and;
• The money withdrawn can only be used to cover your day to day living expenses.
ASIC makes it quite clear that in most cases, you won’t be able to access your superannuation until you retire.
If you are approached by someone claiming that you can set up an SMSF and use some of the funds to pay off debts or ease you cash flow problems, beware! Withdrawing money from your super before you retire could open you up to significant penalties and back taxes.
As a trustee of an SMSF, you could be fined up to $220,000.00 and face a jail term of up to five years if it can be proven that you knowingly allowed illegal early access to your superannuation funds. Even if you return the money to your SMSF, it will still be taxed at a higher non-complying tax rate.
If you are thinking about establishing an SMSF to give you greater control over how your funds are invested, the chances are you will also being seeing an advisor to help you invest your funds. If an advisor suggests early access to your super, you should call ASIC or the ATO to make sure you won’t make yourself liable to penalties.
If you believe that you may have started the process to illegally access funds – for example by setting up an SMSF to roll funds into and access some of those funds early – the ATO urges you to call them on 13 10 20 to discuss your situation.
The ASIC website also has examples of early release schemes – including an extensive list of schemes that they have taken action against. You can see it here