The Institute of Public Accountants (IPA) has warned individuals who have accessed their superannuation benefits early through the COVID-19 economic relief measure could yet face penalties if they are deemed to have been ineligible for the instrument.
“The early release super scheme relies on self-assessment. The fact that the scheme was designed to give speedy access to cash means that the ATO is limited in what it can do to pre-assess individuals applying,” IPA chief executive Andrew Conway said.
“Individuals who have accessed their super should not for a moment think that this means that the regulator has rubber stamped their eligibility. The checking mostly happens afterwards and this is how the self-assessment process is meant to work.”
The latest Australian Prudential Regulation Authority data showed 2.1 million people have taken advantage of the relief measure and Conway said there should be concerns as to how many of this group actually were eligible to do so.
Further, he pointed out it would be easy for the ATO to assess an individual’s set of circumstances in relation to accessing their retirement savings benefits early.
“The ATO has a transparent window into what individuals earn, especially under single-touch payroll. It is therefore feasible that ‘please explain’ letters will start to flow to those who have accessed their future nest egg and may not be eligible,” he noted.
Whether the individual has deliberately misused the measure or done so unwittingly will not absolve them from the applicable penalties, which range in severity, he said.
“The minimum penalty will include the cash withdrawn being part of the individual’s assessable income and paying tax at the respective marginal tax rate. Ordinarily, this amount would not have been taxed if received after preservation age,” he said.
“A total disregard of the rules will also mean a fine of up to $12,600 could be imposed.
“The IPA strongly advises individuals who think they may not have satisfied the eligibility rules to contact the ATO and voluntarily explain their situation. A voluntary disclosure may help to avoid or reduce the imposition of penalties.”
In related news, the Association of Superannuation Funds of Australia published a report on the COVID-19 early release of super indicating the measure has been most popular with individuals under the age of 35 and has been accessed most widely in Queensland, Western Australia and the Northern Territory.''