Speaking in a recent webinar, DBA Lawyers director Daniel Butler said the economic downturn resulting from COVID-19 may see some SMSF trustees tempted to pull money out of their fund illegally.
Mr Butler said SMSF professionals need to make it clear to clients that while they may be able to make a legitimate withdrawal under the COVID-19 early release of super measure, they will need to meet the eligibility criteria and cannot simply “pinch out the money when they’re not entitled”.
Under the COVID-19 early release of superannuation measure, individuals affected by COVID-19 may be able to access $10,000 of their super until 30 June 2020 and a further $10,000 from 1 July 2020 until 24 September 2020 if they satisfy one of the eligibility requirements.
The latest data from the Australian Prudential Regulation Authority (APRA) has revealed that early super payments up to 7 June had totalled at $14.8 billion, with 1.98 million applications out of 2.12 million having been paid out.
“There will be people who breach the law deliberately in view of supporting their family or their business. You need to give these clients tough love. You need to tell clients that the legislation is very strict,” Mr Butler explained.
“The ATO is strict on this; they won’t let up on this one even though it’s COVID; they will still give you penalties. So, clients may raid the till under your watch, and you may have set up the fund for them and they may come back in time and blame you. If you don’t have a licence and you recommended the SMSF to them, then you’re further in the jam.”
In order to minimise these types of risk, SMSF professionals, he said, should write to clients to say that in no circumstances are they “to raid their SMSF”.
Mr Butler said SMSF clients need to be told that if they want to pull money out of the fund, then they need to seek advice on this first; otherwise, the SMSF firm will not be held responsible.
It is also important that SMSF professionals clearly set out the scope of their advice and use proper engagement forms which outline the service they will and won’t provide.