Regulation, Superannuation

Illegal scheme promoter banned, fined

Illegal early access

The Federal Court has imposed a two-pronged penalty on a woman found guilty of promoting and operating a scheme providing illegal early access to superannuation benefits.

A New South Wales woman has been given a significant fine and banned from her SMSF activity after being found guilty in the Federal Court of promoting and facilitating an illegal early-access scheme.

The individual in question was fined $220,000 and given a seven-year ban from establishing SMSFs.

The ATO’s action in the Federal Court determined the woman provided advice to individuals as to how they could access their retirement savings illegally while she was an unregistered tax agent and an unlicensed financial adviser.

The scheme she promoted involved the establishment of an SMSF that was then used as a vehicle to accept rollovers from the balances of Australian Prudential Regulation Authority-regulated funds in which her clients were members.

The funds were then withdrawn, in some cases on the same day, even though the relevant individuals had not reached retirement age and did not satisfy a legitimate condition of release. The funds were then used to fund personal expense items and a fee was charged for the services.

“Schemes like this cause considerable financial disadvantage to people who can least afford it,” ATO SMSF segment assistant commissioner Dana Fleming said.

“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.”

The regulator has used the development as a warning about illegal early-access schemes and reminder to superannuants as to when a person can legitimately draw down on their retirement savings.

To this end, the ATO has reiterated superannuation benefits can only be accessed if a person is at least 65 years old, when preservation age has been reached and retirement achieved, or under the transition-to-retirement rules.

In addition, it pointed out early access to superannuation benefits can only be made where certain medical conditions exist or an individual is experiencing extreme financial hardship.

Earlier this year, the ATO confirmed its continued concern over illegal early-access schemes.

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