ATO stepping up to stop illegal access to superannuation

Under the Superannuation Industry (Supervision) Act, you can only access the whole of the preserved component of your superannuation if you satisfy a condition of release, which is the earliest of the following events:

  1.  You reach 65 years of age, whether you are still working or not
  2.  You permanently retire on or after your preservation age
  3.  You reach your preservation age and wish to draw a transition to retirement income stream from your super fund
  4.  You cease employment with an employer on or after reaching age 60 (although you may continue to work in another employment arrangement)
  5.  You ceased employment with an employer before age 60, but you have since reached age 60 and the trustee is reasonably satisfied that you will not return to work
  6. You suffer permanent incapacity.

The above rules are being circumvented when individuals roll over their super benefits from an Australian Prudential Regulation Authority (APRA) regulated superannuation account to their own self-managed superannuation account (SMSF).

Up until now APRA-regulated funds have only used Australian business numbers (ABNs) to verify the compliance status of the fund, but could not verify who the members of the fund were at the date of the rollover.

To address these issues, the ATO has sought to improve the efficiency of the SMSF registration process in order to help prevent non-legitimate SMSFs from being listed on Superfund Lookup (SFLU). This new registration process means that it takes up to seven days before an SMSF is shown on SFLU as a regulated fund. In this regard, the process will be speed up the rollover of member balances from APRA regulated funds into SMSFs.

Also under the new procedure, APRA regulated funds will actually be able to verify if a person is a member of an SMSF instantly via their name and a date of birth together with the ABN.

According to the ATO, once a new SMSF is displayed on SFLU, it will be given a status of 'Registered - status not determined'. This status is allocated to all SMSFs on registration and will be updated after the fund lodges its first annual return and is assessed as being 'Complying' or 'Non-complying'.

SMSFs with this new status still qualify for 15% concessional tax rates for super funds and are eligible to receive transfers and rollovers.

The ATO have updated SFLU to provide clearer information about the complying and regulatory status of SMSFs, and to identify SMSFs that they have concerns about. This new verification system has been given a high level of accuracy by the regulators and came into effect on 1 November 2010.

Overall this process will speed up rollovers benefits because the APRA account fund will no longer require incorporation documents such as trust deeds and all other things that they required in the past.

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Azure Group

Azure Group is the leading Chartered Accounting, Business Advisory and Strategic Advisory firm supporting the growth & success of fast growing entrepreneurial businesses.

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