The cash sitting in your super fund can be tempting, particularly if you are short of cash.
But, the reality is there are very few ways you can take advantage of your superannuation once it has been contributed to the fund – even if you change your mind.
The sole purpose test underpins access to your superannuation – that is, superannuation is for the sole purpose of providing retirement benefits to fund members, or to their dependants if a member dies before retirement. It’s important to keep this in mind because it’s often forgotten when people are tempted by ‘too good to be true’ schemes to access their super early.
The ATO recently warned against a scheme spreading through suburban Australia where scammers encourage people to access their superannuation early to pay debts, take a holiday or provide money to family overseas in need.
All the scammers need is a fee for their services and you to sign blank forms and provide identity documentation. Typically, the forms are used to roll-over your super from an industry fund, establish an SMSF, and open a bank account for the new SMSF. Once the superannuation is rolled into the SMSF, the funds are accessible to withdraw.
Problem is, accessing the superannuation is illegal unless you meet the conditions.
Any super that is withdrawn early is taxed at your marginal tax rate even if the money is returned to your fund later, plus you are disqualified from being a trustee of your SMSF. If you knowingly allow super benefits to be accessed illegally from your fund, penalties of up to $1.1 million and a jail term of 5 years can apply.
Generally, you can only access your super once you turn 65, when you reach preservation age and retire, or reach preservation age and choose to keep working and start a transition to retirement pension. Preservation ages depend on your date of birth and range between age 55 and 60. There are some very limited circumstances where you can legally access your super early.
Treasury is in the midst of a review into the early release of superannuation.
The review was sparked by a rapid increase in requests for early access to fund medical treatments such as gastric banding surgery.
“A significant proportion of recent applications appear to relate to out-of-pocket expenses associated with bariatric surgery (that is, weight loss surgery), with a smaller proportion attributable to assisted reproductive treatment (ART), also referred to as in-vitro fertilisation (IVF) treatment.”
The review however is focussed on more than medical treatments, looking at the issue broadly including whether it is appropriate to provide early access to superannuation to pay compensation to victims of crime.