Scams and organised crime targeting SMSF industry: auditor
SMSF members are a target for scams and organised crime with one auditing expert predicting there will be a lot more sophisticated scams and attempts to defraud and steal from SMSFs.
In the latest SMSF Adviser podcast, Shelley Banton, head of education at ASF Audits, said many of these scams involve the illegal early access to funds which not only deplete the retirement savings of members but put them in the crosshairs of the ATO.
“There’s this massive SMSF cookie jar that criminals just see sitting there,” she said.
“I’m not a big fan of the word scams, because scams imply that it’s not as serious but this isn’t a scam, it’s actually organised crime, that’s illegally targeting Australians to access their retirement savings when they’re not allowed to.
“We’ve got the current economic climate of high inflation, increasing interest rates, property pressures and so on, and the most vulnerable in our society are going to be hit by these illegal criminal activities.
“And they will be left with no money for retirement but they’re also going to fall foul of the ATO, which is really heartbreaking when you think about it when somebody’s struggling in more than one area they live.”
Ms Banton said illegal early access to superannuation is going to be one of the biggest headaches for the regulator moving forward.
She said when SMSF trustees fail to lodge their annual return, especially their first annual return, they become a ‘red flag’ to the ATO because of the suspicion of illegal access activity.
“If there is illegal early release there could also be other compliance issues, but illegal early releases are definitely the biggest one we’re seeing now,” she said.
“The ATO doesn’t want to disqualify trustees, but they have to take a much harder stance on this issue, given the widespread problems we’re seeing in this area, and obviously, illegal early releases, is one of the most common breaches reported by SMSF auditors.”
She said the ATO is going to look at how serious the contravention is and whether the trustee has a history of non-compliance, as well as likelihood of them falling foul of the SIS rules again.
“They’re looking for those trustees who are not fit and proper persons to be an SMSF trustee,” she said.
“Even though we might see illegal access as a result of a scam, the SIS rules don’t differentiate between schemes that convinced the trustees that it’s okay to take money out when they haven’t met a condition of release, versus those trustees who just do it on their own back.
“In the end all of those trustees just get lumped into the same bucket, and they’re getting access to their money before they’re entitled to do so.”
