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Australia Cracks Down On Illegal Super Schemes

by Mary Swire, Tax-News,com, Hong Kong

03 December 2012

The Australian government has tabled legislation which will clamp down on promoters of illegal early-release superannuation schemes, while individuals will be deterred from accessing their superannuation benefits illegally with the imposition of a punitive tax.

A series of reforms are included in two pieces of legislation introduced to parliament by Minister for Financial Services and Superannuation Bill Shorten - the Superannuation Legislation Amendment (Reducing Illegal Early Release and Other Measures) Bill 2012 and the Income Tax Rates Amendment (Unlawful Payments from Regulated Superannuation Funds) Bill 2012.

Illegal early release schemes are categorized as those promoted to people as a means of accessing their superannuation benefits prior to their being eligible to receive those benefits. In particular, they target non-English speaking communities predominantly in the western parts of Sydney and the western and northern parts of Melbourne.

According to Shorten, such schemes have facilitated up to AUD8m (USD8.3m) in illegal release of superannuation benefits, with an average amount accessed of AUD20,000. Promoters have been found to take fees of up to 50% of the member's superannuation balance, and in some cases promoters have taken the entire balance or exploited member's identity data for other criminal purposes.

At present, there are no specific penalties for such promoters under the superannuation law. However, under the new regime, promoters will face civil and criminal penalties including a fine of up to AUD340,000 and/or imprisonment of up to five years. A further headline initiative is aimed at deterring individuals from accessing their superannuation benefits illegally by taxing these amounts at the rate of 45%.

The Australian Taxation Office will also be given effective, flexible and proportionate powers to address wrongdoing and non-compliance by Self-Managed Super Funds (SMSF) trustees. Finally, the legislation aims at capturing roll-overs to SMSFs as a designated service under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 to ensure superannuation benefits are not being used for illicit purposes.

"Promoters of illegal early release schemes have in the past exploited vulnerable people within our community who may not be fully aware of the rules regarding accessing superannuation benefits. These new penalties will deter promoters from taking advantage of these people and help protect the superannuation savings of all Australians," Shorten said.

TAGS: individuals | compliance | tax | pensions | law | retirement | Australia | fees | legislation | penalties

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