ATO releases Taxpayer Alert TA 2009/1

The ATO has released another Taxpayer Alert warning super investors against taking up offers of early release of their preserved benefits.

The ATO notes that super investments are for the long term to provide financial support in retirement.  Consequently, as a general statement, super investments are “preserved” (ie unable to be accessed) until age 65 or retirement in the period 55 to 65.  Only in special and limited circumstances (and often subject to dollar caps) can super benefits be accessed before retirement/age 65.

Typically, the operators of early release schemes, for a very significant fee ultimately paid by the super investor, permit super investors access to their preserved benefits before age 55, by transferring super benefits into super funds the operators’ control.

These schemes will generally not be legally effective and may expose super investors who use the scheme to significant tax penalties as well as tax at possibly the maximum tax rate.  Additionally, the operator takes a very significant cut – possibly 20% or higher.