Minister for Financial Services and Superannuation Bill Shorten today introduced legislation which implements a number of the Gillard Government's Stronger Super reforms including new penalties for promoters of illegal early release schemes.
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 were introduced into the House of Representatives.
Illegal early release schemes are generally promoted to people as a means of accessing their superannuation benefits prior to being eligible to receive those benefits undermining the Government's retirement income policy and diminishing Australian's retirement savings.
'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' Mr Shorten said.
Promoters of these schemes generally target non-English speaking communities predominantly in the western parts of Sydney and the western and northern parts of Melbourne.
Some schemes have facilitated up to $8 million in illegal release of superannuation benefits with an average amount accessed of $20,000. Promoters have been found to take fees of up to 50% of the member's superannuation balance. In some cases, promoters have gone further and actually stolen the entire balance or exploited member's identity data for other criminal purposes.
Currently, there are no specific promoter penalties under the superannuation law. Under the new laws, promoters of illegal early release schemes will face civil and criminal penalties including a fine of up to $340,000 (2,000 penalty units) and/or imprisonment of up to 5 years.
If you think that you are dealing with illegal early release activity, contact the ATO on 13 10 20.
Another important reform introduced today will deter people from accessing their superannuation benefits illegally by taxing these amounts at the rate of 45%.
For example, if a person accesses $10,000 of their accumulated superannuation savings from their self managed superannuation fund (SMSF) via an illegal early release scheme to pay their business debts their tax liability will be $4,500 plus the medicare levy (1.5%). So total tax payable on the amount accessed would be $4,650.
A number of other reforms also introduced will increase confidence and integrity of the superannuation sector. These reforms include:
- measures to give the ATO effective, flexible and proportionate powers to address wrongdoing and non-compliance by SMSF trustees; and
- capturing roll-overs to SMSFs as a designated service under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) to ensure superannuation benefits are not being used for illicit purposes.