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Researcher Capital Preferences says super funds fail to appreciate the tension many retirees experience between their needs in their golden years and the size of their nest eggs.
Hefty fines for dishonest super release
The Australian Taxation Office has announced it will take no prisoners in situations where applicants are found deliberately exploiting the early release super system.
The tax office has already stopped applications and prevented super money from being released and reviews circumstances after an application has been processed.
Members, who have lost their job or had their income reduced by 20 per cent can withdraw $10,000 from their super this financial year and an additional $10,000 from July 1.
According to Industry Super Australia (ISA), bank data shows in some cases money released from super has been spent on items like alcohol, furniture or gambling.
If the ATO finds an applicant to have withdrawn super without any changes to regular wage and is unable to demonstrate eligibility when asked for evidence, the amount paid to the applicant will become assessable income.
Those providing false or misleading information may face penalties of more than $12,000 for each misleading statement.
The tax office will be monitoring income tax returns, Single Touch Payroll data, information from super funds and Services Australia data to check against incorrect claims.
ISA welcomes these enforcement efforts and has consistently warned of the risk that people who are ineligible could apply.
ISA chief executive Bernie Dean says: “Ineligible applicants undermine the credibility of this emergency scheme and could be holding up payments for those that desperately need money now.”
Treasury had estimated 1.5 million will take out $27 billion from super but already 2.3 million applicants have successfully withdrawn a total of $15.9 billion from their retirement savings.
Data from APRA released earlier this week shows ISA member funds have delivered 772,000 members $5.8 billion via the scheme.
“Tapping into super early comes with a hefty price tag and should only be done as a last resort. We will work with the Prime Minister and the Treasurer on how we can regrow balances after this scheme, because we all pay, through higher taxes, for more people retiring with only the aged pension,” Dean says.
The tax office encourages Australians to be fully informed and consider taking out financial advice before accessing super early.
“Withdrawing your super early and then recontributing that amount back into your super fund and claiming a personal super contribution deduction, can result in a range of tax outcomes,” The ATO says.
Depending on individual circumstances, this could also result in tax and superannuation implications including excess contributions tax, concessional contributions (taxed at 15 per cent) and impacting eligibility for a super co-contribution.
