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Illegal early release of super on ATO watch-list

Illegal early release of super (IER) is one of the risk areas that the ATO has identified as being of most concern and in need of action.

Each year, the ATO analyses its data to identify the areas of high risk that will form part of its compliance program. Aside from illegal early release, another key risk area is non-lodgement. In the last year, the ATO has targeted individuals and promoters who register self-managed super funds with the intention of using the fund to illegally access super benefits.

In the 2019 financial year, the ATO cancelled the registration of 609 newly registered SMSFs who intended to use the funds for IER. They also withheld the details of 352 funds from the Super Fund Lookup, meaning they couldn’t receive payments and rollovers.

The ATO has warned of severe consequences for you and your fund if super is accessed before you are legally entitled to it. These include disqualification of trustees, administrative penalties, the fund deemed as non-complying, or even prosecution.

Fund trustees or members who have knowingly been involved in a scheme or been approached by anyone claiming that they can withdraw their super early should contact the ATO immediately to advise of the situation and avoid further penalties.

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Tax on super death benefits for dependants vs non-dependants

July 9, 2020

A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.

Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.

Super death benefit payments are subject to tax when:

Non-dependants must calculate how much money in the super account is a:

The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).