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ATO raises concerns over $200m in illegal SMSF loans


Illegal early release and prohibited SMSF loans remain top concerns for the Tax Office, particularly in the current economic environment.

By Miranda Brownlee 10 minute read

The ATO is currently seeing significant amount of money being raided out of SMSFs each year in the form of prohibited loans, ATO assistant commissioner Justin Micael has warned.

The ATO previously outlined last month that $635 million had been withdrawn from SMSFs illegally over a two year period.

However, this estimate does not include amounts taken out as part of prohibited loans, said Micale, speaking at the Tax Institute’s Superannuation Intensive.

In ATO’s two years of analysis, the ATO identified that SMSFs are entering into over $200 million in prohibited loans each year.

“While the majority of these loans have been repaid it’s important to emphasise these arrangements are prohibited,” said Micale.

“Prohibited loans are another concern for us because the rules don’t allow trustees to provide financial assistance to members and relatives or related parties where they breach the in-house asset rules.”

Micale said these estimates highlight the seriousness of the issue and the importance of ensuring that SMSFs are not seen as a vehicle for accessing super illegally or to providing short-term finance.

“The level of illegal early access we’re identifying is still concerning and may be heightened in the current economic climate,” he said.

“We know from our compliance work and other research, attitudes to super and lack of knowledge are key drivers, and we find many people who dip into their super illegally are experiencing some form of financial stress. The temptation to access retirement savings in accounts they control can just become too great.”

The ATO’s research has found that new funds are the most likely to engage in this behaviour compared to established funds.

“Around two-thirds of the total retirement savings at risk relates to individuals entering the system with no genuine intent to run an SMSF,” said Micale.

SMSFs who have received a rollover and fail to lodge their first ever annual return remain are a significant red flag, he said.

“Currently 16 per cent of funds registered in 2022 have failed to lodge their first return. Of these, 50 per cent or 2,500 appear to have rolled money into their SMSF,” he stated.

The ATO is also seeing existing trustees who inappropriately access their super and stop lodging to avoid detection.

“For the 2022 year, there are around 14,000 funds that for the first time have failed to lodge which have members who have not reached preservation age. Given their age and the fact that these returns are at least nine months overdue, clearly indicates a heightened risk,” said Micale.

“Finally, we see some existing trustees who continue to lodge but breach the operating standards and a contravention is reported to us by their SMSF auditor.”

For the 2022 year, almost 34 per cent of all reported contraventions indicate trustees may have inappropriately accessed their retirement savings by breaching payment standards, entering into prohibited loans with members and relatives, or not meeting in house asset requirements, said Micale.

“To address these risks, we deploy a wide range of strategies to prevent, detect and correct inappropriate behaviours. The approaches we take don’t stand still, they evolve and our ability to identify and deal with risks is becoming more sophisticated,” he said.

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Miranda Brownlee

Miranda Brownlee


Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

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