ATO targets early superannuation access scheme recipients

ATO crackdown: meet the criteria of hardship, or face a higher rate of tax income or a fine.

The Australian on Thursday revealed Treasury had revised up estimates about how much money would be withdrawn from the super system from $29.5bn to $41.9bn in light of the take-up of the early ­release scheme.

The Australian Taxation Office has warned it is reviewing applications for the early super access scheme and those who don’t meet the criteria of hardship will be slapped with a higher rate of tax on their income or a fine.

Speaking on Thursday at the select committee on COVID-19 inquiry, members of the ATO said they had been writing to several people who had received money via the scheme.

ATO second commissioner, client engagement, Jeremy Hirschhorn said the agency had started a pilot program of contacting people if they did not meet the scheme’s early access requirements.

“We will not be forcing people to put money back in their super,” he said.

“If we withdraw our declaration and they will have to pay tax on their marginal rate, in the worst case we can impose penalties for misleading statements which is as much as $12,600.”

But Mr Hirschhorn said it was unlikely the ATO would impose “significant consequences” and said there would be some people who honestly believed they were eligible at the time of application but who later proved not to be.

“We moderate those consequences as to the deliberateness of those actions where we think someone has made an honest mistake as to their eligibility,” he said. “We work on the assumption Australians are honest.”

The Australian on Thursday revealed Treasury had revised up estimates about how much money would be withdrawn from the super system from $29.5bn to $41.9bn in light of the take-up of the early ­release scheme, the decision to ­extend it until the end of the year and the second lockdown in Melbourne.

This represents about 1.5 per cent of the $2.7 trillion superannuation system. More than 2.6 million Australians have taken up the program to support themselves through the pandemic.

Ashurst partner Lisa Simmons said possible financial penalties or requirements to pay tax came at a bad time for many.

“So the risk is that people, who may genuinely be facing financial hardship as a result of COVID, wind up in a much worse financial position as a result of withdrawing money under the early access scheme from their superannuation fund when they were not entitled to, either in error or by design,” said Ms Simmons.

Herbert Smith Freehills partner financial services Michael Vrisakis said it was hard to know what the ATO would do in the case of those who innocently misunderstood their eligibility.

“You’d expect you couldn’t anticipate, you’d think the ATO would have to come up with a policy for how they deal with those people,” he said. “They have flagged to people that you should have the evidence. I don’t think it’s unreasonable for the ATO to expect you had the documentation.”