The ATO has encouraged SMSF practitioners to help it combat instances of illegal early access of superannuation benefits by recognising the red flags associated with this type of behaviour and reporting it.
The regulator recognised a different approach should be taken with this exercise for individuals establishing a new fund and those people who are existing SMSF trustees.
“We know that 80 per cent of people who register an SMSF do so with the support of a tax agent. [That means as] accountants, financial advisers and other SMSF professionals, you have a key role to play in addressing this situation,” ATO superannuation and employer obligations deputy commissioner Emma Rosenzweig told attendees at the SMSF Association National Conference 2024 in Brisbane last week.
“This may include busting myths or making sure you don’t overestimate the financial literacy of your client.
“If the registration of an SMSF doesn’t look right, have a conversation with your client and plant the seed about the issues they might be facing. [For example], do they really understand what they’re getting into, when they can legitimately [attain] access to their super, the significant costs and impacts of doing something illegal and the dangers of relying on incorrect advice.”
With regard to existing SMSFs, Rosenzweig said practitioners need to recognise some common signs often linked to the illegal early access of benefits in order to report non-complying activity.
“When established funds have gone off track, we often find that when you have been able to support them, this provides a really huge sense of relief and saves cost, time and stress. So we’re asking you to look for warning signs that a trustee may have veered off track,” she said.
“Illegal early access, non-lodgement and financial difficulty often go hand in hand, so in practical terms if you see a client in these situations, please reach out to them and help them to resist temptation.
“So I encourage you to connect with your clients and use your insights into their particular circumstances to try to resolve any issues.”
She reminded practitioners that using the ATO’s voluntary disclosure service or fact sheet regarding illegal early access of benefits could be beneficial for their clients.
Based on its own data, the regulator has determined 66 per cent of the illegal early access behaviour with which it is concerned relates to individuals with no genuine intent to run an SMSF and that this type of activity saw $637 million exit the superannuation system in the 2021 and 2022 income years.
