This article mentions domestic and family violence. If you or anyone you know needs support, contact the national domestic, family and sexual violence counselling service contact on 1800 737 732 or visit 1800respect.org.au.
Hobart woman Claire's* former husband set them both up in a joint self-managed super fund (SMSF) in 2005, and pressured Claire to move all her superannuation into the fund. She had no idea that the structure would eventually be used to drain her entire retirement savings.
"I had worked a lot of jobs and even made lots of voluntary contributions, so I had a very healthy super balance at the start," she says.
"When we eventually separated in 2019 I got $10,000 of his super, but compared to the hundreds of thousands in my super that had disappeared it was next to nothing," Claire says.
The accountant who set up the fund never informed Claire that the insurance premiums were eroding her super
Advocates and lawyers say SMSFs and their often complex structures and lack of regulation compared to other regulated funds, leaves them open to being used as a tool of financial abuse in domestic violence situations.
In Claire's case, her super contributions to the SMSF went towards expensive insurance policies, taken out by her former husband on an investment property, which was eventually sold at a loss. Her husband did not contribute equally to the fund and the accountant who set up the fund never informed Claire that the insurance premiums were eroding her super.
"I've lost almost everything, I have no money to retire on now," Claire says. "I worked hard all my life, I sacrificed, and now I'm 61 and I'm going to be working the rest of my life,".
Financial abuse through SMSFs
Self-managed super funds are private super funds that you manage yourself, rather than an industry or retail fund which has more consumer protections. While it gives people greater control over how money is invested, there are big responsibilities and risks involved for the individuals. SMSF assets in Australia exceed $1 trillion and represent a quarter of the total superannuation sector.
The circumstances in Claire's case may be particular, but she is far from alone.
There needs to be traction points and we need to see systems in place to raise and act on red flags
Julie Dal Pra, financial counsellor
Julie Dal Pra is a financial counsellor specialising in financial abuse in business at nonprofit organisation at Each. She says she sees complex financial structures "weaponised" and women coerced or forced into signing documents they don't understand enough to be able to freely consent to.
"We believe this is happening a lot more than we are seeing [in our case work], the issue is underreported. Often women may not even know it is happening until decades later," she says.
Dal Pra cites the case of one client whose partner drained over $500,000 from their joint SMSF by taking out loans to his own business. She didn't even know that the documents she had been coerced into signing were to roll over her superannuation from a fund with more consumer protections to the less protected joint SMSF.
Many super funds have policies to check with members when their funds are being transferred out of their accounts. In this case, the super fund, one of the largest in the country, failed to do so.
There are few protections available when things go wrong for women involved in SMSFs
"We see time and time again complex structures being weaponised and we see gatekeepers [the professionals setting up these structures] failing miserably. There needs to be traction points and we need to see systems in place to raise and act on red flags," she says.
Rebecca Glenn, CEO of the Centre for Women's Economic Safety, says there are few protections available when things go wrong for women involved in SMSFs.
"One of our big concerns is the risk of going into a self-managed super fund, meaning that you have no recourse if the perpetrator then takes control of that money. I suspect this is just the tip of the iceberg," she says.
Victims of financial abuse may be asked to sign forms they don't fully understand.
Multicultural communities impacted
Financial counsellors who work with multicultural communities, like Rachna Bowman, head of financial wellbeing at South East Community Links in Melbourne, says superannuation in itself is already a complex product many migrant women don't fully understand, let alone when SMSFs come into play.
"Often we will find someone from the same [multicultural] community encouraging people to set up an SMSF and either acting as the broker or the financial advisor or accountant setting up the SMSF. Many people don't understand what their rights and risks are when setting up an SMSF and the system is foreign to them," she says.
Lily Jiang, director of advocacy (campaigns) at Super Consumers Australia says greater government and industry efforts are required to increase community awareness on the risks of financial abuse in superannuation and SMSFs, particularly among migrant and multicultural communities.
"This will enable frontline community organisations to better support and protect victim-survivors," she says.
Super Consumers Australia is calling for accounting professionals to make sure SMSFs are set up in the best interests of all parties.
Reforms needed
Jiang says the very nature of SMSFs creates opportunities for coercion and abuse, where members are also trustees who make all the decisions about the fund.
This is coupled with minimal oversight and limited consumer protections. The 2024 government inquiry into financial abuse highlighted this dangerous combination and the shortcomings in the SMSF system for preventing and addressing coercion and abuse.
"The inquiry also flagged the crucial role financial advisers, planners and accountants play as frontline service providers and the need for greater professional training and ethical responsibilities with respect to financial abuse," Jiang says.
"For many women, superannuation is the largest and only asset they hold alone. Without concerted efforts to disrupt financial abuse in super, perpetrators will continue using structures like SMSFs as vehicles for abuse," she says.
Super Consumers is advocating for reforms requiring super funds to proactively contact members who are transferring their balance into an SMSF
Jiang says Super Consumers Australia supports the government inquiry's recommendations to review the intersection between financial abuse and the superannuation system, particularly SMSFs. In terms of specific prevention measures, Super Consumers is advocating for reforms requiring super funds to proactively contact members who are transferring their balance into an SMSF. This will help funds identify any red flags for potential financial abuse and provide support to people impacted.
"We also want to see advice and accounting professions uplift their professional standards and training to ensure SMSFs are appropriate and set up in the best interest of all parties, and conduct sufficient due diligence to proactively identify and prevent financial abuse."
Industry responds
Peter Burgess, CEO of the SMSF Association, says their organisation trains its members, financial advisors, accountants and lawyers to spot financial abuse risks during accreditation processes. He adds the association supports "some" of the Joint Parliamentary Committee recommendations on reforming the super system.
"One of the commanding features of our superannuation system is its flexibility and the ability that individuals have to choose the type of superannuation fund they want to be in and the amount of control and flexibility they have over the management of their retirement savings," Burgess says.
"We have to be careful not to introduce new rules that unduly impact on that portability, that ability for consumers to choose their own superannuation fund and the amount of control that they want when it comes to the management of their retirement savings, but it's also important that we have protections in place so that consumers are protected against the unscrupulous behaviour of others," says Burgess. "It's a balancing act."
There needs to be consistent reporting rules and guidance so financial advisors in all states have the same advice
Sarah Abood, Financial Advice Association Australia
Likewise, Financial Advice Association Australia (FAAA) CEO Sarah Abood says more needs to be done.
"I think there are a lot of things that can be improved," she says. "There needs to be consistent reporting rules and guidance so financial advisors in all states have the same advice on where and when to report concerns. Currently the system is fragmented and varies from state to state."
However, Jiang says other sectors like banking and telecommunications have industry codes and practices to address financial abuse, but the super and advice industry is a long way behind. Greater government and industry efforts are needed to prevent and respond to financial abuse across Australia's superannuation system.
*Not her real name
We're on your side
For more than 60 years, we've been making a difference for Australian consumers. In that time, we've never taken ads or sponsorship.
Instead we're funded by members who value expert reviews and independent product testing.
With no self-interest behind our advice, you don't just buy smarter, you get the answers that you need.
You know without hesitation what's safe for you and your family. And our recent sunscreens test showed just how important it is to keep business claims in check.
So you'll never be alone when something goes wrong or a business treats you unfairly.
Learn more about CHOICE membership today
Stock images: Getty, unless otherwise stated.
