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ATO cracks down on ERS misuse

The Australian Taxation Office (ATO) has cracked 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 said it is beefing up enforcement efforts saying it is prepared to take enforcement action where individuals have deliberately exploited the system.

"Compliance remains one of our priorities to ensure the integrity of the tax and super system," the ATO said.

"We have seen some COVID-19 early release of super examples where people are doing the wrong thing. In some cases, we have stopped applications and prevented super money from being released.

"In other cases, we review circumstances after an application has been processed to ensure the integrity of the program."

The ATO said through the Single Touch Payroll (STP) system it has real time information as to whether individuals are employed and how much they are being paid.

"Our compliance approach is based on ensuring that people have not exploited the measure. Where we have concerns that claims were not genuine we will review them."

The taxation office listed a number of behaviours it considers suspicious including applying for ERS when there has been no change in regular salary or wage, artificially arranging affairs to meet the criteria and making false statements or fraudulent attempts to meet the criteria.

The ATO said each false and misleading statement will carry a penalty of over $12,000.

Additionally, the ATO said it is on the lookout for people seeking to withdraw and recontribute their superannuation for a tax advantage.

"We are investigating some cases and may consider it appropriate to apply the general anti-avoidance rule for income tax (known as Part IVA) in relation to a COVID-19 early release of super arrangement if you (or a representative) enter into a scheme mainly for the purpose of obtaining a tax benefit," the ATO warned.

"Withdrawing your super early and then recontributing that amount back into your super fund and claiming a personal super contribution deduction, can result in a range of tax outcomes."

The ATO said individuals may face paying additional tax if they exceed the concessional or non-concessional contributions cap, and may be taxed up to 15% by funds.

"You should ensure that you comply with the eligibility rules to access your super early and your broader obligations under the taxation legislation," it said.

"We understand that these are uncertain times and people's circumstances change, so it is important that you keep records demonstrating your eligibility in case we need to see them."

The move was welcomed by ISA, which said it was unfortunate that some individuals have been taking advantage of the scheme meant to assist those in the current time of crisis.

"Industry Super Australia has consistently supported this scheme's policy intent of providing help to members in need but has consistently warned there was a risk people who were not eligible could successfully apply," ISA said.

"Unfortunately, those concerns have been realised with troubling reports of bank data showing money from super was being spent on discretionary items like alcohol, furniture or gambling."

ISA said members should think carefully before accessing the scheme as it comes with a hefty price tag at retirement, for those in their 20s it could be as high as six figures.

Treasury had estimated 1.5 million Australian would remove around $27 billion from super, with current applications at over two million.

ISA chief executive Bernie Dean said ineligible applicants have undermined the credibility of the scheme and could be holding up payments for those that desperately need money.

"The ATO has a clear warning to those wanting to make a dodgy application - don't - you will be caught, made to pay more tax and fined," Dean said.

"Tapping into super early comes with a hefty price tag and should only be done as a last resort. We will work with the Prime Minister and the Treasurer on how we can regrow balances after this scheme, because we all pay, through higher taxes, for more people retiring with only the aged pension."

Read our full COVID-19 news coverage and analysis here.

Read more: ATOERSISAIndustry Super AustraliaAustralian Taxation OfficeCOVID-19Early Release of SuperannuationBernie Dean
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