01.Beware illegal schemes
Financial services watchdog, the Australian Securities and Investments Commission (ASIC), has been busy chasing and charging promoters of illegal early-release super schemes.
Unscrupulous promoters offered consumers illegal access to their super before retirement age. These schemes exist in a number of variations. For example:
Consumers are encouraged to roll over their super savings into a self-managed super fund (SMSF), from which they receive a cheque to the value of those savings, after high fees are deducted. The scamsters claim you can use the money in your SMSF for any purposes you like, which is not the case — see below.
The scamsters falsely tell your current fund that you’re rolling over your super savings into another fund. They then intercept the cheque and retain high fees before transferring the balance to you.
Please note: this information was current as of March 2008 but is still a useful guide to today's market.
Even with the high fees charged the schemes may seem appealing if you’d like to get hold of your super money, but in fact early access to your super is only possible under certain strict conditions.
Generally, your super money is ‘preserved’ until your preservation age (55 if you were born before 1 July 1960, going up gradually to 60 for people born after 30 June 1964). Preserved money can’t be taken from your account without meeting specific conditions of release.
Accessing your super early can attract the attention of ASIC, the Australian Taxation Office (ATO) and the Australian Prudential Regulation Authority (APRA). You’re only eligible to access your super prior to your preservation age in four situations:
- cases of ‘severe financial hardship’
- a temporary resident permanently leaving the country (not New Zealand citizens)
- permanent incapacity
- restricted ‘compassionate grounds’ — for example, paying for medical treatment
In each case, the decision to release your super before preservation age is made by the trustee of your fund and/or APRA:
- The scamsters tell your fund you want to transfer your money into another fund, which is legal, not that you want to take it out altogether, which isn’t. Taking your super early for legitimate reasons is free, but requires you to apply to both APRA and your super fund.
- You can download the relevant forms at www.pra.gov.au.
- If you access your super illegally, you can incur fines and be assessed for tax on the full amount of the benefit, without any of the concessions normally available with legitimate super payments.
- Paying tax as well as the fees to the scamster could end up costing more than you received from your super savings.
- For more information go to www.ato.gov.au or phone the ATO on 13 10 20. If someone offers to help you access your funds, check whether they have an Australian Financial Services Licence (AFSL) or are an authorised representative of a licence holder, contact ASIC at www.fido.asic.gov.au, or phone 1300 300 630.