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Legal Tip 79: Don't be Tempted to Dip into your Super Early

Discussion in 'Legal Issues' started by Terry_w, 27th Sep, 2015.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Unauthorised Withdrawals of Super

    When a person is running their own SMSF it would be very easy and perhaps tempting to ‘borrow’ or release early some money from your super fund. This would be a contravention of various sections of the SIS Act, even if the money is paid back to the fund.

    Possible breaches include
    • s62 Sole Purpose test - to provide for retirement of its members.
    • s65 Lending money to members
    • s84 breaching in-house assets rule
    • s109 Not dealing at arm’s length

    In a recent case Mr and Mrs Ryan were both trustees and the only members of their SMSF. In 2009 they withdrew about $17k from the fund before meeting a condition of release. IN 2010 they withdrew $53k. In 2011 another $70k and in 2012 $70k again.

    They made full admissions, cooperated with the ATO and paid back the money borrowed.

    The penalty was $20,000 for each of them.

    See
    DCT (Superannuation) v Ryan [2015] FCA 1037
    http://www.austlii.edu.au/au/cases/cth/FCA/2015/1037.html
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Worse case can be a custodial sentence :(
     
  3. thatbum

    thatbum Well-Known Member

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    Personally I think the Ryans got off pretty lightly - must have been a bunch of mitigating circumstances?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Hi Mr Bum

    If you look at the case judgment towards the end other cases and penalties are reviewed and the penalties all seem to be around the 30k mark. I would have thought this is a rather light penalty myself.