New ATO program will target illegal early release from SMSFs

“It is too soon to share any findings, but we are intending to publicly release this estimate in early 2024,” Mr Micale said.

“This is our first attempt at measuring the amount of money inappropriately withdrawn by trustees who manage their own super.”

He said that results from research undertaken by the financial product comparison website Finder suggest 56 per cent of Australians would raid their super if they were allowed to.

“We also know from our own research that one-third of existing trustees lack the capability or don’t take responsibility for managing their SMSF,” he said.

“So clearly community attitudes to super and lack of knowledge are key drivers.”

Mr Micale continued that the ATO is often confronted with individuals and business owners dealing with cash flow problems, cost of living pressures, relationship breakdowns and debt.

“In these circumstances, the temptation to access retirement savings invested in accounts they control and have direct access to often becomes too great,” he said.

“In the current economic climate where more individuals are facing increased levels of financial stress, illegal early access is something we need to be even more mindful of.”

As part of its focus on illegal early access, Mr Micale said the ATO is concentrating on identifying new trustees who enter the system with the sole intent of taking all their retirement savings before they’re entitled.

“This is often facilitated by promoters who usually charge a large fee,” he said.

“A key marker for us is where newly established SMSFs have received a rollover but have not lodged their first-ever annual return.”

He said currently 17 per cent of the 28,000 funds registered in 2022 have failed to lodge their first return. Of these, 50 per cent appear to have rolled money into their SMSF.

“This suggests they may have deliberately entered the system to illegally access their super,” he added.

“We also know some existing trustees inappropriately access their super early and stop lodging to avoid detection.”

Additionally, in 2022 he noted there are around 32,000 SMSFs with members that have not yet reached preservation age, and for the first time have failed to meet their lodgment obligations.

“While there may be legitimate reasons for these delays, this group certainly presents with a heightened level of risk,” he said. “We are also seeing some existing trustees who continue to lodge but have breached the operating standards and a contravention is reported to us.”

For the 2022 year, the ATO has received around 11,500 auditor contravention reports including 20,000 contraventions.

Almost 35 per cent of these contraventions suggest trustees may have inappropriately accessed their retirement savings by breaching payment standards or entering into prohibited loans with members, relatives or related entities.

Mr Micale said the ATO is deploying a number of strategies to address the issue with its core focus on prevention by providing support and guidance products, undertaking new registrant reviews, and removing SMSFs from superfund lookup where they have failed to comply.

“For instance, we continue to build on the SMSF publications available on our website to support trustees with meeting their obligations in the different stages of their SMSF lifecycle,” he said.

“We are also developing a new trustee education course. It will consist of several online learning modules focused on the lifecycle of an SMSF. The development is well underway, and we hope to go live with this product in the new year.”

The ATO’s new registrant reviews involve the risk assessment of all SMSF registrations to ensure trustees are entitled to set up a fund and not do so to illegally access their super.

“This program also acts as a safeguard against identity fraud,” he said.

“We estimate this program has protected $64 million in super monies from leaving the system during the 2023 financial year.”