IPA questions eligibility of 2.3m early release recipients
The Institute of Public Accountants is concerned individuals have not understood the eligibility rules for the early release of super scheme and expects the ATO will soon be issuing “please explain” letters.
APRA figures for the period ended 21 June 2020 show that 2.3 million people have been paid $17.1 billion under the early release scheme.
The Institute of Public Accountants said this poses a question of whether people applying under the scheme have understood the eligibility rules.
“It is understandable that an individual or a small-business owner may have cashed in a portion of their superannuation during these difficult COVID pandemic times just to keep their head above water,” said IPA chief executive officer Andrew Conway.
“However, the early release of super scheme relies on self-assessment. The fact that the scheme was designed to give speedy access to cash means that the ATO is limited in what it can do to pre-assess individuals applying.
“Individuals who have accessed their super should not for a moment think that this means that the regulator has rubber-stamped their eligibility. The checking mostly happens afterwards, and this is how the self-assessment process is meant to work.”
The ATO, he said, has been very clear on the eligibility rules, and applicants under the scheme need to be fully aware of the penalties that may apply if the rules are breached.
“The scheme was put in place at the height of the pandemic to help individuals access emergency cash to deal with the financial consequences associated with COVID-19. While the regulators cannot control how the money was spent, they can control whether those who accessed their super genuinely met the eligibility criteria,” he warned.
“The ATO has a transparent window into what individuals earn, especially under Single Touch Payroll. It is therefore feasible that ‘please explain’ letters will start to flow to those who have accessed their future nest egg and may not be eligible.”
Mr Conway stressed that it didn’t matter whether individuals failed the rules knowingly or in ignorance.
“The minimum penalty will include the cash withdrawn being part of the individual’s assessable income and paying tax at the respective marginal tax rate. Ordinarily, this amount would not have been taxed if received after preservation age,” he stated.
“The IPA strongly advises individuals who think they may not have satisfied the eligibility rules to contact the ATO and voluntarily explain their situation. A voluntary disclosure may help to avoid or reduce the imposition of penalties.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.