SMSF trustees illegally accessing super

The ATO has released findings on how much super from SMSFs has left the system before trustees have met a condition of release.

Super must remain preserved

One of the main features of superannuation is that you typically can’t access your money until you reach age 65 or when you retire after reaching your preservation age (between 55 and 60 depending on your date of birth). You may however be able to access your superannuation earlier in limited circumstances, such as should you become permanently disabled or suffer severe financial hardship.

Considering superannuation is not generally available during your working life, it means it will be preserved and remain invested in the background in order to help generate a valuable source of funds for you to live on in retirement.

ATO findings

The ATO’s new data shows that 66%[1] of the illegal early access relates to individuals who are entering the system with the sole intent of raiding their retirement savings.

Across a two-year period, around $637 million of superannuation savings left the system illegally via SMSFs. This can be broken down to an estimated amount of $381 million illegally accessed in 2019/20 and approximately $256 million in 2020/21.

These large amounts of money do not include the $200 million in prohibited loans taken out in each of these years, however pleasingly over 75% of these loans have been repaid.

Reminder to SMSF trustees

There are various reasons why individuals illegally access their retirement savings. Lack of knowledge and attitudes towards superannuation are key drivers. Other reasons include being targeted by unscrupulous promoters, or where trustees are dealing with some form of financial stress or other personal issues. Regardless of the reason, superannuation cannot be accessed illegally before retirement.

As mentioned above, you may be able to access your superannuation if you are suffering from severe financial hardship however strict eligibility requirements apply.

ATO on the lookout

In order to prevent such behaviour from occurring, the ATO will continue to focus on the illegal early access of superannuation on an annual basis. The ATO has scaled up its compliance actions and as a result, the number of sanctions it has applied has significantly increased. Consequences of this serious breach of obligations usually involve disqualification as a trustee, taxation of the benefit that was accessed and the imposition of penalties. Unfortunately in the end, often the trustee ends up worse off financially.

In the end, illegal early access to superannuation impacts the integrity of the system, an individual’s retirement income and puts pressure on taxpayer funded pensions. It is therefore crucial that all SMSF trustees are aware of the superannuation rules and their responsibilities. If you require further information or are uncertain about when you can access your superannuation benefits, please contact our office for a chat.

[1]  ATO, Levelling-up SMSF Compliance: The Regulator’s Update, 21 February 2024