As at the end of June 2020, Australian’s had accessed $25billion in early access Super, a Government scheme put in place to help people financially affected by the ongoing Coronavirus Pandemic.
When the scheme first opened back on April 20, Industry Super Australia (ISA) conducted research which showed that up to 40% of Australians (more than one million) who were planning to apply for the scheme may not meet the strict eligibility criteria.
To be eligible, a citizen or permanent resident of Australia and New Zealand must require the COVID-19 early release of super to assist them to deal with the adverse economic effects of COVID-19.
In addition, one of the following circumstances must apply (source https://www.ato.gov.au/individuals/super/in-detail/withdrawing-and-using-your-super/covid-19-early-release-of-super/#Eligibility):
- You are unemployed
- You are eligible to receive one of the following
- JobSeeker Payment
- Youth Allowance for job seekers (unless you are undertaking full-time study or are a new apprentice)
- Parenting Payment (which includes the single and partnered payments)
- Special Benefit
- Farm Household Allowance
- On or after 1 January 2020 either
- you were made redundant
- your working hours were reduced by 20% or more (including to zero)
- you were a sole trader and your business was suspended or there was a reduction in turnover of 20% or more (partners in a partnership are not eligible unless the partner satisfies any other of the eligibility).
The ATO has since started cracking down on those misusing the Early Release of Superannuation scheme, in a move that has been welcomed by the Industry Super Australia (ISA). The ATO has put in place extra enforcement efforts, saying it is prepared to take enforcement action where individuals have deliberately exploited the system. Claims for ERS where people are not entitled are causing a backlog in the system, meaning that Australians who are in dire need of their money are being forced to wait.
How the ATO is assessing and finding non-entitled claims
Compliance remains one of the ATO’s top priorities when it comes to ensuring the integrity of the tax and super system. In some cases, the ATO has been able to stop applications from progressing and prevented super from being released. In other cases, the ATO is reviewing circumstances after an application has been processed. Through the use of Single Tough Payroll (STP), the ATO has access to real-time information as to whether individuals are employed and how much they are being paid.
Some behaviours in particular that the ATO will monitor include:
- Applying for ERS when there has been no change in regular salary or wage
- Artificially arranging affairs to meet the criteria
- Making false statements or fraudulent attempts to meet the criteria.
Those found to be exploiting the system can be fined over $12,000 for each false and misleading claim.
The ATO is also on the lookout for people who are withdrawing their super and then recontributing for a tax advantage.
Fines for misuse
As mentioned above, those found to be exploiting the system can be fined over $12,000 for each false and misleading claim. If the ATO investigates your claim and you’re unable to demonstrate your eligibility, the early release of super will become assessable income and need to be included in your tax return and you’ll have to pay tax on the released amount.
Where to go to find more information
If you’re unsure of your eligibility for the ERS, contact Greenhalgh Pickard today.
We are happy to discuss your situation but do not offer financial advice.
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