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SMSF schemes for illegal access of super

The ATO has issued a warning for Australians to be aware of scheme promoters that promise to allow you to withdraw your superannuation early, and illegally.

Individuals can legally withdraw super when they turn 65, even when they haven’t retired, are at their preservation age and retire, or under the transition to retirement rules while continuing to work. Super can only be accessed early under circumstances that mainly relate to specific medical conditions or severe financial hardship.

The ATO is taking action to shut down promoters who tell people they can gain access to their super before they are eligible to by setting up a self-managed super fund (SMSF), which is illegal. There has been a number of schemes that encourage individuals to channel money inappropriately and deliberately to avoid paying tax.

Penalties for involvement in illegal super schemes include fines up to $420,000 for individuals and up to $1.1 million for corporate trustees. An individual may also lose their right to be a trustee of their superannuation fund or, in some cases, jail time up to five years.

Fund trustees or members who have knowingly been involved in a scheme or been approached by anyone claiming that they can withdraw their super early should contact the ATO immediately to advise of the situation and avoid further penalties.

Posted on 13 January '20 by , under Super.

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What happens to your super in a divorce? 

Divorce or separation can be emotionally draining and stressful as it is, but the legal and financial responsibilities you also need to think about add an extra burden to dealing with the spit. One key area that needs to be considered to protect your financial future is your superannuation and what happens to it after your divorce.

The superannuation splitting law treats superannuation as a different type of property. This means that like any other asset it can be divided between partners who were in a marriage or de facto relationships either through:

  • A formal written agreement where both parties sign a certificate confirming that independent legal advice about the agreement has been provided.
  • Seeking Consent Orders to split the superannuation.
  • Seeking a court order to split the superannuation in the event you cannot reach an agreement.

Splitting the super does not automatically give you a cash asset as it is still subject to superannuation laws.

There are three main options for dealing with your super in a split:

  • A payment split: this is the most common way of dealing with super at the end of a relationship. If you are not yet eligible to withdraw your super, the benefit will be split whilst remaining in the super system. If you have retired or are eligible to withdraw your super, your split can be done as a payment.
  • Payment flag: you can defer your decision if you want to wait for a specific event to occur, such as retirement or the maturation of an investment. Flagging allows you to protect the interest in your super fund and prevents the super fund from making a payment out of the super account until the flag is lifted.
  • No split or flag: this is when you choose to treat super as a financial asset instead of splitting or flagging the super. The super is then a relationship asset that can be divided between the parties. This option is often used by de facto relationships in Western Australia as their super cannot be split, making it their only legal option.

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