The ATO has revealed the magnitude to which SMSF establishment is contributing to its most concerning area of compliance failure, being the illegal early access of super benefits.
Speaking at the Institute of Financial Professionals Association 2024 Conference held in Melbourne last Friday, ATO superannuation and employer obligations assistant commissioner Peta Lonergan noted: “Did you know about two-thirds of illegal early access behaviour we’re concerned about relates to individuals entering the system with no genuine interest to run a self-managed super fund?
“Unfortunately, this is often facilitated by promoters who are charging a large fee.”
With regard to combatting this behaviour, Lonergan recommended SMSF practitioners and their clients use the regulator’s existing resources, such as the fact sheet on its website, and confirmed the ATO is continuing to take action to address the issue.
“We have a very strong compliance program. So we do contact a lot of new entrants and make sure that they understand what their obligations are,” she said.
She also acknowledged the extent of the role practitioners were already playing in the sector’s efforts to eliminate the problem.
“We are pleased to say we have seen an increase in professionals reaching out to let us know about arrangements they are concerned about and we do use that information and we share it with ASIC (Australian Securities and Investments Commission) and other regulators to help protect individuals from being coerced into these schemes,” she said.
According to Lonergan, the education of trustees still has a significant role to play in eliminating this compliance issue, particularly when it is being motivated by circumstances such as financial challenges.
“I think it’s just [about] trying to get that message out there [that] there is compassionate release of super if you need to access your super. [So individuals need to] look at [using the] compassionate release of super [provisions] first rather than [engage in] illegal early access [actions],” she advised.
Last month, the ATO confirmed $657 million has been exited from the superannuation system as a result of illegal early access schemes.
