Pippa Colman: Superannuation stitch-up a reminder to have the best advice

A superannuation stitch-up which left one man without a wife, girlfriend or super while facing more financial pain is a reminder to make sure your advice is on the money.

Recently a client of ours (let’s call her Jill) could not take a split of her husband’s super in a property settlement because he (let’s call him Jack) had drawn it all out and given it to his new girlfriend, even though he was nowhere near retirement age.

And you won’t be surprised to hear that the new girlfriend (let’s call her Cruella) has shot through with the superannuation money, leaving the husband in a tight spot.

So how did that happen? Withdrawing your super early unless you meet a condition of release is illegal.

Australian superannuation laws have rules about when you can withdraw your super.

The trust deed of your super fund has rules about payment of benefits e.g. when you reach retirement age.

There are some exceptions to the general rule including if you are suffering from a terminal medical condition.

So how did Cruella get her hands on Jack’s super? Well, there are people around who promote schemes for the early release of super.

Cruella may have been one of them.

(Note: Those early release schemes are illegal.)

Pippa Colman, Founding Director of Pippa Colman & Associates Law Practice.

Cruella convinced Jack to set up a Self-Managed Super Fund (“SMSF”) and then roll his industry super into that fund.

Then he took the money out and gave it to Cruella to invest because she had a “You Beaut” investment offshore.

I hear you ask; how could he have been so silly?

Jack did his part, but when Cruella got his money, you guessed it; the You Beaut investment did not work – so Cruella said – and Cruella and the money vanished.

So poor, silly Jack had no wife, no super, no money and no Cruella.

Unfortunately for Jack, his troubles have not finished.

As a member of a super fund who has accessed it illegally he has to pay interest and penalties.

His taxable income will include the amount he withdrew even if he returns the super to the fund later and unfortunately Jack can’t do that because Cruella has his super and she and the money are missing.

Sadly for Jack, there may be other penalties in store for him as a trustee of his fund.

The moral of this story is that early release of super may look good, but get professional advice versus advice from a new girlfriend.

Pippa Colman is the founding director of Pippa Colman & Associates Law Practice.

Originally published as Pippa Colman: Superannuation stitch-up a reminder to have the best advice