Illegal access nets $637 million

.

The figures were released by the regulator today at the SMSF Association National Conference 2024 in Brisbane, where ATO superannuation and employer obligations deputy commissioner Emma Rosenzweig provided the first report on an illegal early access estimate project revealed late last year.

“Recently it was announce for the first time that we have found for the 2019/20 year an estimated $381 million of super has been illegally withdrawn by trustees of SMSFs,” Rosenzweig said.

“This figure would have been half-a-billion dollars if we hadn’t protected over $125 million leaving the system as part of our new registrant program.

“In the 2020/21 year, we estimate over $256 million of super has been illegally accessed, with almost $170 million additional that was protected at registration.”

“These are large amounts of money and they don’t include prohibited loans across those two years, so a total of $637 million of superannuation savings has left the system illegally through SMSFs.”

She added prohibited loans were also of concern and in each of the two financial years mentioned, SMSFs entered into more than $200 million in prohibited loans each year, but 75 per cent were repaid.

Newly established SMSFs were more likely to engage in illegal early access or prohibited loans compared to established funds and around two-thirds of the $930 million involved in illegal access or loans over the two years came from people entering the system with no genuine intention to run a fund, she noted.

She said the ATO formed its estimate using audit reports and examining funds that had yet to lodge an annual return and would continue to do so each year as the regulator remained concerned illegal early access was ongoing.

“We looked at all auditor contravention reports of funds that have lodged in those two years where those reports had noted a contravention that could amount to illegal early access and then for those SMSFs that have not lodged, we undertook a random inquiry program and a statistically valid sample,” she said.

“Through the results of both of those we have come up with this estimate across the entire population.

“So will we be doing it every year? Yes.

“We do see already in 2021/22 there are indicators that suggest that illegal early access is still prevalent. We continue to see many new trustees entering into the system with the sole intent of raiding their retirement savings, sometimes facilitated by promoters charging a large fee.”

Jason Spits
February 21, 2024
smsmagazine.com.au