When the Federal Government announced early access to super as part of its economic stimulus response to the coronavirus pandemic, it was intended only for people in severe financial duress.
Now, as fears grow that thousands of Aussies have accessed the scheme without warrant, the ATO will be scrutinising all drawdowns, and anyone who doesn’t meet the criteria will be fined.
By Paul Rattray
Thousands of Australians who have accessed their super over the past few months will be audited by the ATO in the near future as part of a crackdown on the Covid-19 ‘early release of super’ scheme.
Under the scheme, those who met the eligibility criteria, were able to withdraw $10,000 from their super last financial year and can apply for a further $10,000 this financial year, so long as they apply by September.
The scheme – like all of the Government’s swift economic stimulus responses to the coronavirus – had some flaws, but perhaps it’s greatest flaw was assuming that people would be honest. The application process relied on those individuals applying for funds to read the criteria, get professional advice, and to ensure they met the criteria.
In recent days Industry Super Australia (ISA) has estimated about 480,000 Australians had accessed super funds by June 14, and about 395,000 of these were under the age of 35.
Last month, Australian Prudential Regulation Authority figures revealed $14.8 billion had already been withdrawn, with 2.12 million applications still in lodgement with the tax office.
This rush to access the scheme prompted concerns that many Australians were taking advantage of it in order to get their hands on their super without actually experiencing financial hardship. Now the ATO says those who did so will be caught, and they will face harsh penalties.
The ATO is also looking for individuals who have used the scheme as a tax dodge by contributing money to their super at a reduced tax rate before withdrawing it.
With it’s sophisticated data matching scheme, the ATO will be able to catch cheats, and there are laws in place which support the ATO’s access, collection and use of data from third parties for purposes such as these, as well as laws which enable it to enforce penalties, if necessary.
Anyone who has done the wrong thing needs to voluntarily fess up now, or face the consequences. And the best way to do this is with the help of a tax agent to deal with the ATO on your behalf. The ATO has made no secret of the fact that it prefers to converse and negotiate with professionals who understand the regulations and the jargon, because this professional knowledge means that most matters can be dealt with pretty swiftly.
Superannuation was rolled out in the early 1990s and it was designed so that the government could eventually do away with the old aged pension scheme. Meaning that Australians, over the course of their working lives, would save enough to support themselves financially in their post-working years. That’s the theory. But as anyone nearing retirement will tell you that superannuation has taken a hit as a result of the global coronavirus pandemic and market recovery is proving steady, but slow. So it’s not as simple as just saving in super, additional financial strategies can be required to maximise your super and other accumulated assets to make sure you have enough funds to retire comfortably.
Superannuation is heavily regulated for this reason and so, providing Australians with access to their super during the pandemic (and resulting recession) was unprecedented. And it’s unlikely to happen ever again.
The early release scheme is of course still open and while the coronavirus remains active some people may well need to access funds over the coming financial year and should not be fearful of doing so, so long as they meet the criteria.
But doing so really should be a last resort. IAccessing your super early is a decision that needs to be made with extreme care because it will affect your future finances. But, if you get advice from a financial planner, you will potentially be able to find other ways to manage your money right now, that will serve you better in the long run than eroding your super for short-term gain.
This is general advice only and should not be treated as personal advice.
Always seek professional advice that consider your personal needs when making financial or investment decisions or changes to your superannuation.