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The ATO has outlined concerns about the use of sophisticated arrangements to facilitate the illegal early release of superannuation funds.
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Commissioner flags 'heightened risk behaviours' with SMSFs as sector grows
21 February 2025
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8 minute read
At the SMSF Association National Conference on Wednesday, the Commissioner of Taxation revealed the SMSF sector has been experiencing an alarming uptick in trustees accessing their funds illegally.
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The Commissioner of Taxation Rob Heferen noted in his address that the ATO had continued to see indicators of heightened risk in behaviours and arrangements in the SMSF system.
It was revealed the current financial year had resulted in the disqualification of 660 trustees so far, which the Tax Office views as an extremely serious sanction.
According to the Commissioner, since 2019 the amount of illegally accessed super had reduced; however, the amount of prohibited loans increased.
The Commissioner said the illegal activity had caused a level of concern and put retirement savings at risk or inappropriately took advantage of the tax concessions.
“We have seen increased sophistication of arrangements to facilitate illegal early release being promoted to vulnerable individuals,” he said.
“In the 2023-24 financial year, the ATO disqualified over 660 trustees. This was largely due to illegal access to superannuation funds, and over $7 million in administrative penalties and additional tax of $16 million was raised.”
The Tax Office released the Illegal Early Access (IEA) estimate in February 2024 to provide an annual estimate of the total amount of super withdrawn by SMSF members before they were legally entitled.
The IEA highlighted exorbitant amounts having been withdrawn illegally by trustees, with the estimate for the 2019–20 year measured at $381 million.
In the 2020–21 year, the tool allowed the ATO to estimate over $256 million of super had been illegally accessed and that there were $206.2 million in prohibited loans.
“I can announce today that our IEA estimate for the 2021-22 income year is $250.1 million, and with an estimated $231.7 million in prohibited loans,” the Commissioner said.
Deputy commissioner Emma Rosenzweig echoed these concerns, having noted that the ATO had scaled its compliance action over the last few years to address the heightened risk.
Rosenzweig warned there could be significant financial impacts for members as illegally accessed benefits were assessable penalties, interest, and disqualifications could be applied.
Sanctions for promoters of illegal early access schemes could also be severe and include the loss of professional licences, substantial additional tax, penalties, and criminal prosecution which could result in imprisonment.
“This issue continues to be a significant concern to us, without the latest estimate of the amount accessed either blatantly, or through loans being $481.8 million,” Rosenzweig said.
“This is small. But ultimately a statistically significant increase from the 2021 estimate, showing that some trustees continue to treat their SMSF as a convenient source of funds.”
“Individuals who access their retirement savings before a condition of release has not only impacted their retirement income but also the integrity of the system and put pressure on taxpayers funded pensions.”
It was added that being disqualified as a trustee could impact an individual’s ability to be a trustee again, their personal and professional reputation as well as their career as the information was published and made public by the ATO.
Other risks on the ATO radar noted by Heferen and Rosenzweig included the non-lodgment of SMSF annual returns, regulatory contraventions and non-arm’s length income and expenses.
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