2 million Aussies at risk of $12k fine

Pictured: Australian pedestrians, Australian fine notice and cash. Images: Getty
The ATO has sounded the alarm on the early release of super scheme. Images: Getty

Australians caught attempting to withdraw their super without meeting the eligibility requirements will face fines of $12,600, the tax office has warned.

The federal government announced Australians financially hit by coronavirus would be able to access up to $20,000 of their super over the coming two years.

Treasury estimated 1.5 million Australians would access their super early, but 2 million have already dipped in.

To be eligible, Australian and New Zealand citizens need to have become unemployed, be receiving the JobSeeker payment or other benefit like Youth Allowance or a parenting payment, or have seen their working hours reduced by at least 20 per cent. Sole traders whose turnover fell by 20 per cent or more were also eligible.

Now, the Australian Tax Office (ATO) is warning it’s closely monitoring those who do choose to withdraw the cash but who aren’t eligible.

In an updated fact sheet on the ATO website, the office said it has seen some examples where Australians 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.”

It said it’s using income tax returns, Single Touch Payroll data, information from super funds and Services Australia data to monitor the financial realities of those claiming the super.

“For example, through STP we have real time information as to whether people 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.”

What’s the ATO looking for?

The ATO said Australians who ask for the cash but who haven’t taken a pay cut will be on its watch-list, along with those who are “artificially” arranging their affairs to meet the eligibility criteria.

Additionally, those who make false statements will be scrutinised, as will those who are attempting to withdraw and re-contribute the super for a tax advantage.

“If you are unable to demonstrate your eligibility when we ask for evidence, we may revoke the determination that we issued in respect to your application. This means the amount paid to you under Covid-19 early release of super will become assessable income [and]need to be included in your tax return and you will pay tax on the released amount,” the ATO said.

Australians who give false or misleading information will also face penalties of more than $12,000 for each offending statement.

The ATO gave the example of a hypothetical worker who received JobKeeper but had no change to their working hours or income. As such, the worker is required to include the $10,000 as assessable income in his tax return and pay tax. However, as this hypothetical worker made an honest mistake, they won’t be stung with a penalty.

But another worker who deliberately changes their affairs to appear eligible will need to include the super as taxable income and pay $12,600 in penalties.

Similarly, those who withdraw the super and then re-contribute it to gain a tax advantage will also cop penalties. For example, an ineligible Australian who attempts to withdraw their super and recontribute it to claim a personal super contribution tax deduction will suffer a penalty and the cancellation of the tax benefit.

Industry Super welcomes ATO move

Industry Super Australia has welcomed the crackdown after reports found Australians had been using the money for alcohol, gambling and furniture.

“Ineligible applicants undermine the credibility of this emergency scheme and could be holding up payments for those that desperately need money now,” Industry Super Australia chief executive Bernie Dean said.

“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.”

He said Australians need to remember that tapping into super now comes with a huge price tag by retirement, and should be considered 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.”

Follow Yahoo Finance Australia on Facebook, Twitter, Instagram and LinkedIn.

Yahoo Finance Breakfast Club
Yahoo Finance Breakfast Club