Early release measures ‘a job half done’ for SMSFs
Treasury’s proposal to allow the early release of super for victims of domestic violence does not address the issue that, in the context of SMSFs, the perpetrator will likely block the release of funds to the victim, warns a technical expert.
In November last year, the government released an issues paper on the early release of superannuation benefits as part of a second round of consultation.
One of the proposals for early release in relation to compassionate grounds is to introduce a new ground of release for victims of family and domestic violence.
This would allow victims of family and domestic violence to access multiple releases over a 24-month period, per person, up to a $10,000 cashing restriction, subject to judicial evidence or two pieces of non-judicial evidence confirming the individual is a victim of family and domestic violence.
SMSF Alliance principal David Busoli said that while he supports the government’s measure to allow funds to be released under compassionate grounds for victims of domestic violence, he believes it’s “only a job half done” given that the fund still has to agree to pay it out.
“Now with an SMSF, generally speaking, the perpetrator is the one that can prevent that payment from being made,” Mr Busoli said.
“If the perpetrator who has created domestic violence can prevent the money from being paid out, then that’s what they’re going to do.”
The measure therefore needs to go further, he explained, so that the regulator has the power to extract that money from the fund in the same way that they can remove excess contributions, and then once they have it, pay it to wherever it’s got to go.
“[That way] it’s not just a release mechanism, it’s actually an enforcement. So, they can force the fund to do it, they can extract the money and then pay the person,” he said.
“In these situations, [perpetrators] can do irrational things, they do them out of hurt and they do them to cause hurt. We need someone to step in.
“Victims of domestic violence can find themselves in an impoverished situation because their perpetrator is able to keep them that way, and it causes a whole new level of trauma. The tiny amount that they’re able to get out of super would be of some assistance.”