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‘Inventive’ early access schemes top SMSF disqualifications list

‘Inventive’ early access schemes top SMSF disqualifications list

early access schemes, SMSF disqualification list
Miranda Brownlee
19 September 2018

With illegal early access accounting for the bulk of SMSF disqualifications in the last financial year, the ATO is intensifying its focus on the promotion of early access to super schemes.

ATO deputy commissioner James O’Halloran said for the 2017-18 financial year, the ATO disqualified 257 trustees from around 169 SMSFs.

Most of the disqualifications related to illegal early release of funds, he said, with around 70 per cent of the 169 funds cancelled for this reason.

The ATO is seeing SMSFs, particularly those close to retirement, being targeted by “very inventive schemes” that the ATO would clearly consider inappropriate, Mr O'Halloran told delegates at the Chartered Accountants Australia and New Zealand National SMSF Conference.

“They are sometimes approached by friends or we’ve even seen instances where people from trusted communities or areas are approaching individuals telling them what they can do to get early access to their superannuation,” he said.

“There is a large amount of money in SMSFs and when there are immediate needs that members are trying to deal with, they might see accessing that money based on non-professional advice they’ve received, as a way of [dealing with those needs].”

Mr O’Halloran also referred to the recent case of Hart and Commissioner of Taxation heard in the Administrative Appeals Tribunal, which was a case involving early access to super.

This case examined the commissioner’s decision to disqualify an individual as trustee on the basis that he was not a fit and proper person to act in that role.

“Simply put, in this case, there was a failure to keep assets of the fund separate, the fund acquired property from a related party, the trustee allowed a charge to be placed over an asset of the fund, the trustee failed to comply with payment standards and allowed early access and there was a consistent failure to comply with lodgement,” he summarised.

“Those things strike against the very core of what the obligations of a trustee are and the standards that one would expect.”

Concerns around illegal early access to super have been raised by the ATO previously, with ATO assistant commissioner Kasey Macfarlane warning professionals last year that some of the contraventions reported to the ATO as loans have turned out to be illegal early release upon closer inspection.

The ATO also issued a stern reminder to SMSF trustees in 2015 about the serious consequences for those who attempt to make mortgage payments with their superannuation funds under the guise of financial hardship.

‘Inventive’ early access schemes top SMSF disqualifications list
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