NewsHub

Protect yourself against fraud and super scams

October 2009

The Australian Securities & Investments Commission (ASIC) have reported that recent market conditions are contributing to an increase in the number of people attempting to gain illegal early access to their superannuation.

Accessing your superannuation prior to your preservation age, which ranges from 55 to 60 years depending on the year in which you were born, is illegal except in very limited circumstances. The repercussions for attempting to access superannuation early can include high tax rates and penalties, fines and, in some instances, imprisonment.

In instances where superannuation has been accessed illegally, people have often been the victims of scams where individuals or groups falsely promote and facilitate the early access of superannuation. Typically, promoters of illegal schemes target people in financial strife, recently retrenched workers and those living in rural and remote communities, with the promise of being able to withdraw super, or use a ‘self managed fund’, to pay off debts, make a deposit on a home, or buy a car or holiday. The reality however, is that there are laws in place to ensure that your superannuation is preserved and to be used as intended, which is to provide funds through your retirement.

Once the funds have been transferred to another arrangement, their management is largely at the discretion of the promoter. In some instances, people have been left with no funds at all, and to top it off, are required to pay the funds back to the Australian Taxation Office (ATO). In other cases, promoters demand a commission, usually taking a percentage of your super. They may get you to sign false statements, exposing you to fines or possibly jail. ASIC has successfully obtained jail terms for the most serious offenders.

When can I access my super early?

Generally, you can’t access your super until you retire. If you meet strict conditions, you could potentially access some of your super legally, including cases of financial hardship or on ‘compassionate grounds’. You should consider that tax may be required to be paid on any money withdrawn.

In instances of financial hardship, you can apply to Plum for early access to your funds. Generally you must prove that you have been receiving welfare benefits continuously for a period of at least 26 weeks and that you are unable to meet your day-to-day living expenses. Superannuation money will be released only to cover your everyday living expenses and is limited to no more than $10,000 in any 12 month period if you are under age 55.

Superannuation money can also be released on compassionate grounds to pay for medical treatment for a life-threatening illness or for acute and chronic pain and associated transport requirements, home or motor vehicle modifications to cater for those with severe disabilities, palliative care or associated expenses. Some funds can be released to make mortgage repayments, but only if your lender is threatening to sell your home because you have failed to meet the terms of your mortgage. An application for the release of funds needs to be made to the Australian Prudential Regulation Authority (APRA).

Watch out for identity fraud too

Fraudulent access to super is on the rise. Some super fund member statements are being stolen from private mailboxes and the information in them is then used to create false identities. Self managed funds, linked to bank accounts, are then set up. Thieves contact the member’s super fund, and by assuming their identity, they request the super money be rolled into the fraudulent account.

Each of these organisations may ask you to provide written documentation to support your case and to establish that you are not liable for any debts accumulated in your name.