Recent cyber-attacks on major super funds show criminals are always looking for new ways to illegally access Australia’s growing pool of retirement savings, but it’s not just the big guys who need to worry. Smaller funds are also under threat.

Self-managed super funds (SMSFs) are being targeted both through email scams to steal personal identifying information and through schemes that encourage fund members to inappropriately access their retirement savings.

Email super scams

Both the ATO and the Australian Securities & Investments Commission (ASIC) are warning super savers about scammers using online, phone and email communications to target their super savings.ⁱ

The ATO’s latest scam alerts include cautions about emails being sent out by scammers pretending to be from the tax regulator or myGov.ⁱⁱ

The emails falsely tell people they are due to receive compensation from the ATO and ask them to reply with information such as payslips, their tax file number, driver’s licence and Medicare details.

Scammers then use the information to commit refund fraud, steal the target’s superannuation, or sell their ID to organised crime groups on the dark web.

Super scheme warnings

In addition, scammers are also offering schemes that encourage super fund members to inappropriately set up and use an SMSF.

The schemes encourage people to establish an SMSF for inappropriate and illegal reasons, such as obtaining present day benefits. They can also involve stealing the fund member’s superannuation benefit.ⁱⁱⁱ

Some schemes are designed to convince people to move their super from an APRA-supervised large super fund to an SMSF so they can access their super before a condition of release is met, or to invest their super savings into fraudulent investments.

Other schemes being offered involve property, non-concessional cap manipulation, dividend stripping, limited recourse borrowing arrangements (LRBA), personal services income, asset protection, creating multiple SMSFs and inappropriate use of reserves.

Participating in these types of schemes, risks not only losing some or all of your retirement savings, but also serious penalties including disqualification as a trustee and your SMSF being wound up.

Ask before proceeding

The ATO cautions SMSF trustees not to be tempted by ‘too good to be true’ offers and to seek independent advice from a professional with no connection to the scheme before committing.

It also emphasises the importance of considering how a super scheme may affect your SMSF and whether it contravenes the tax and super laws. This is particularly the case if the scheme includes transactions involving related parties, as this may break the rules around dealing at an arm's length basis.^iv

If the scheme involves the SMSF purchasing business interests (such as property or a share in a business), the trustees should always check the acquisition will be at arm's length by obtaining an independent valuation prior to the transfer.

Identifying unlawful SMSF schemes

According to the ATO, unlawful SMSF schemes can often be recognised by features such as artificial or contrived arrangements with complex structures around an existing or new SMSF, or the use of seemingly unnecessary steps or transactions.

Warning signs of an SMSF scheme often include the illegal early release of super or encouraging people to set up an SMSF to use their super savings for personal purposes.

Tax avoidance schemes encouraging you to channel money inappropriately into your SMSF to avoid paying tax are also usually illegal.^v

To avoid making an illegal investment, ensure you seek professional tax and financial advice about both establishing an SMSF and the assets in which it invests.

Reporting schemes

f you are offered an unlawful super scheme, you should reject it and report it to the ATO immediately.

You can report unlawful super schemes and their promoters to the ATO via its online tip-off form, the ‘contact us’ section of the ATO app, or by phone on 1800 060 062.

Taxpayers who disclose to the ATO that they are involved in an unlawful super scheme may be eligible for a reduction in penalties.

If you suspect that you have already been involved in a fraudulent scheme, contact us or the ATO, so we can help to correct your current position and your potential exposure to further scams.

i Superannuation scams - Moneysmart.gov.au

ii Scam alerts | Australian Taxation Office

iii SMSF schemes | Australian Taxation Office

iv How SMSFs are taxed | Australian Taxation Office

v Tax schemes | Australian Taxation Office