The ATO has expressed its alarm over the significant increase in the number of prohibited loans being made from SMSFs to other parties.
ATO superannuation and employer obligations deputy commissioner Ben Kelly noted it is currently of more concern to the regulator than the illegal early access of member benefits.
“In the 2022/23 financial year, our prohibited loan estimate jumped to $398 million from the 2021/22 published figure of just over $231 million,” Kelly told delegates at the SMSF Association National Conference 2026 in Adelaide today.
However, he conceded $50 million of this jump in prohibited loans being made by SMSFs was attributable to a change in the ATO’s process, whereby for the first time it included an estimate of this type of activity that may have stemmed from funds that are yet to lodge an annual return.
“Nevertheless, even after this one-off impact has been taken into account, this represents an increase of around $115 million in one year. While many of these loans are eventually repaid, the reality is SMSF members should not be accessing their funds in this way,” he noted.
According to Kelly, ATO statistics showed a slightly more positive outlook with regard to illegal early access of member benefits.
“For the 2022/23 financial year, we estimated that $252 million was accessed early from SMSFs without a condition of release being met. That’s slightly up from $250 million the previous year,” he revealed.
“While the increase is modest, the figure itself is significant and with this being our fourth consecutive year where we have undertaken a program to estimate the illegal early access risk, it tells us this issue isn’t going away.”
He said the regulator has identified common characteristics of SMSFs that engage in both illegal early access of member benefits and issuing prohibited loans.
“Our analysis indicates that most cases of illegal early access and prohibited loans involve newly established funds that never intended to operate as genuine superannuation funds,” he indicated.
“Instead, they were set up as conduits for short-term finance, often facilitated by promoters who target vulnerable individuals and charge exorbitant fees.
“We also know that SMSFs with balances below $200,000 are the most likely to engage in illegal early access, with just over 80 per cent of all cases coming from this group.”
He took the opportunity to issue one key message for trustees with regard to this subject.
“My underlying message to trustees is to not access or loan the funds in the first place – it is the only way to avoid a breach,” he said.
“We will continue to take a firm stance on these behaviours.”
