Early super access scheme punished with $220,000 penalty, ban from setting up SMSFs

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Running an illegal early access to superannuation scheme has led to financial penalties and a ban from setting up SMSFs.

The Federal Court has handed down a $220,000 penalty to someone running an illegal early access to super scheme. They were also banned from setting up an SMSF, rolling money into an SMSF or making payments from an SMSF for seven years.

The individual in question admitted to 22 contraventions of the SIS Act, involving assisting people to set up SMSFs, rollover balances, and then withdraw money.

Most of the people involved in the scheme were changed fees, ranging from $600 to $7,000, for this ‘service’. According to the ruling they were not warned that the “potential consequences were very significant”.

The Court said that the “strong deterrent” of penalties are appropriate for promoters of early release schemes. Though the Court also accepted the submissions from both sides that the total penalty imposed was “at the very lowest end of the range”. Despite the “very significant harm” of the offending, the Court acknowledged the saving of public resources by the parties reaching an agreement, and the co-operation and “difficult circumstances” of the individual. The $220,000 penalty is only a fraction of the $7.92 million maximum penalty.

The ATO, which took the case to court, took the opportunity of the ruling to again warn people to watch out for illegal early access to super schemes.

“You can only access your super early under circumstances that mainly relate to specific medical conditions or severe financial hardship,” said the ATO.

“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.”

ATO Assistant Commissioner Dana Fleming said that schemes like those in the court case “cause considerable financial disadvantage to people who can least afford it”.

“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.”

Suspected promoters and schemes can be reported to the ATO at ato.gov.au/tipoff or on 13 10 20.

SolePurposeTest has decided not to name the individual involved, in part due to the Court finding that their “circumstances were difficult at the time of the contraventions, and remain so”.

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