Penalties Imposed for Illegal Early Access to Superannuation

Last updated June 2011

Accessing your superannuation money before you are legally allowed can have a devastating impact, not just financially.

Penalties for a person withdrawing their super
The entire amount will be included in their personal tax return as income and will be fully assessed at their marginal tax rate plus Medicare levy.

Any fee or commission withheld to facilitate the roll-over and/or set up a self managed superannuation fund will also be taxed as assessable income in their tax return.

Penalties will be applied where these benefits have not been correctly included in the individual’s tax return and a tax liability arises as a result of this.

A general interest charge will also be payable if the correct amount of tax is not paid on time.

Where an individual voluntarily provides information, reduced penalties and possibly interest will apply.

Penalties for a trustee
Illegal access to superannuation benefits will result in the disqualification of the trustee. Put simply, this means you may never be allowed to operate your own SMSF ever again.

In addition, individual trustees of superannuation funds who knowingly allow illegal early access of superannuation benefits may face penalties of up to $220,000 and/or jail terms of up to five years, or fines of up to $1.1 million for corporate trustees.

Penalties for a self managed superannuation fund
A self managed superannuation fund may be treated as non complying and the fund’s income taxed at the highest marginal tax rate. The fund’s income may include the value of its assets accumulated prior to becoming non-complying.

Put simply, the penalty of being made non-complying could amount to nearly 50% of the entire value of all assets in the fund.

Penalties for a promoter
Promoters of illegal schemes will be assessed on all fees and commissions received for facilitating the early release or setting up a self managed superannuation fund. If these amounts are not declared as income, penalties will apply to any tax shortfall that results. A general interest charge will also be payable.

Promoters may also be prosecuted under the promoter penalty laws and will also be referred to the Australian Securities and Investments Commission (ASIC) as their activities may involve breaches of the Corporations Act and the ASIC Act. Such breaches may include misleading or deceptive conduct, or dealing or giving financial product advice without an Australian Financial Services Licence.

Civil and criminal penalties including significant fines and/or terms of imprisonment may be imposed.

What are the tax implications when funds are rolled over from a SMSF to a large fund?

Where an individual has rolled over their superannuation money from a large fund into a self managed superannuation fund, but have not yet accessed that money from the self managed superannuation fund, they may choose to return the money to the large superannuation fund or roll-over the money to another large fund. This can be done without any income tax consequences.

What should I do if I have entered into or have been presented with an opportunity to participate in an early access scheme?

You should phone the Taxation Office's Tax Evasion Referral Centre on 1800 060 062 or the Australian Securities and Investments Commission Infoline on 1300 300 630 to report your situation.