The Australian Taxation Office (ATO) is advising individuals and Self-Managed Super Fund (SMSF) trustees against engaging with early release schemes that encourage them to withdraw their super before they are legally entitled to.

What Is an Early Release SMSF Scheme?

There are limited circumstances under superannuation law in which you can access your super early and eligibility requirements relate to specific expenses. However, the ATO has seen a rise in schemes that involve channelling super funds or assets into SMSFs in an attempt to grant people early access to their retirement savings before they are qualified to do so.

The ATO has warned that illegally accessing one’s super could lead to significant financial and personal consequences, including payment of additional income tax on the amount withdrawn, loss of retirement savings and the potential disqualification of SMSF trustee status.

Illegal early release schemes typically target vulnerable individuals unaware of super laws and feeling the constraints of rising debt and a cost-of-living crisis. For example, property purchase schemes target anxious first-home buyers claiming to help them access Australia’s property market. These schemes may appear legitimate, but they contravene super laws.

The schemes might also be something as simple and enticing as withdrawing from your super to help with personal expenses such as credit card debt or to go on holiday.

When Can You Access Your SMSF Early?

Generally, you can only legally access your super when you reach preservation age and retire, or turn 65 even if you are still working.

Access to your super earlier than this is limited and comes with specific eligibility requirements subject to the situation. Early access reasons can include compassionate grounds, due to severe financial or personal hardship, access due to temporary or permanent incapacity, or because of medical expenses for you or your dependent.

What Are the Consequences of Withdrawing From My SMSF Early?

The ATO closely monitors superannuation transactions to detect and prevent illegal early access and have warned that any amount that is found to be illegally withdrawn will be included as income in an individual’s tax return, even if the money is returned to the fund. This means the individual may pay additional income tax, tax shortfall penalties, and interest, and any attempt to return funds to the super fund will be considered a new contribution.

The ATO have restated that SMSFs are aimed to provide retirement benefits to its members and that it is generally illegal for anyone to benefit from their fund outside of this arrangement.

If you are facing financial difficulties or considering accessing your superannuation early, it is essential to explore legitimate options available, or seek advice from a qualified financial advisor to understand the potential consequences and explore other legal alternatives.

How Do I Identify an Illegal SMSF Scheme?

Some of the warning signs that you might be dealing with promoters of schemes designed to illegally access super early include:

  • They will tell you to transfer or rollover your super into an SMSF, claiming that the money can be put towards anything you like; or
  • They will often charge high fees and commissions and request identity documents, which could lead to identity theft and a person’s superannuation stolen.

The ATO has also advised individuals to be wary of schemes that feature contrived or artificial arrangements with complex structures around new or existing SMSFs. These are schemes that often involve unnecessary steps and transactions, designed to avoid paying taxes, gain a tax refund or bring forward a tax benefit.

What Action Should I Take?

The best course of action for individuals that think they are being subjected to an illegal SMSF scheme is to check the person they are dealing with has a financial license under the Australian Securities and Investments Commission (ASIC) financial register on the Moneysmart website.

If doubts persist, the ATO recommends finding a second opinion from other licensed advisers that are independent of the scheme.

Contact Us

If you have any questions regarding your SMSF or you would like further support, our expert team are here to help. Please don’t hesitate to contact our Manager of Self Managed Superannuation Funds, Simon Abbott, on (03) 5244 6867 or at

This article was written by Client Service Coordinator George Kerr.

Disclaimer: The information provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals. Davidsons is not licensed to provide any financial product advice nor make any recommendations in respect of any financial product. If you require such advice, you will need to consult a financial adviser who is licensed to provide financial product advice before you make a decision on a financial product.