A recent case brought before the Administrative Appeals Tribunal (AAT) has served to illustrate the seriousness with which the Australian Taxation Office (ATO) assesses the illegal early access superannuation fund benefits.
The case in question saw a taxpayer attempting to have the superannuation benefits he accessed from his self-managed superannuation fund (SMSF), in breach of the payment regulations, excluded from his assessable income.
In all, two amounts were prematurely released from the fund, $50,000 relating to the 2008 year and $37,000 in 2009.
Both amounts were included in the taxpayer’s assessable income to have the mandatory tax rates applied to them.
The appeal was made to have the ATO exercise its discretionary powers to not have the two amounts of released benefits included as assessable income seeing neither withdrawal was used for personal purposes.
Instead the benefits were used to fund the taxpayer’s business that was experiencing financial difficulties at the time and thus categorising them as assessable income would be unfair.
The AAT rejected the appeal and upheld the ATO’s decision to treat the amounts as assessable income.
The reasoning behind the decision was to preserve the integrity of the rules governing conditions of release for superannuation fund benefits.
This protects the objectives of the superannuation system, to provide adequate retirement savings for individuals, reinforcing the seriousness with which the ATO needs to treat these types of breaches regardless of the reasons behind them.
In surmising the case, Super Central warned individuals should not view this case as demonstrating the only penalty for a benefit payment without satisfying a proper condition of release is to have those amounts treated as assessable income.
“Other issues will need to be considered: whether the breach of the payment standards was intentional and whether there was a breach of the sole purpose test (which is a civil penalty provision).”
“These other issues involve the possibility that the compliance status of the fund may be revised and that personal penalties may be imposed on the taxpayer,” Super Central said.
