Will post-COVID-19 super top-ups be gamed?
Questions are being asked about whether the Australian Taxation Office (ATO) holds sufficient information about hardship superannuation early release recipients to prevent them from gaming the system if the Government introduces tax or other incentives to encourage recontributions.
Both CPA Australia and the major industry superannuation fund lobby groups have used pre-Budget submissions to urge the Government to provide incentives for people who took early access to recontribute to top-up their super, but there are concerns that such a move could lead to gaming the system.
The concerns have been expressed amid suggestions that some people may have already used the early release scheme to benefit from a recontribution strategy involving withdrawing a lump sum and recontributing these funds into super as a non-concessional or concessional contribution (where the member can claim a tax deduction for the contributed amount).
Deloitte superannuation partner, Russell Mason said that while he was in favour of measures which would encourage people topping up their superannuation balances after having taken early access, he believed such a regime might be open to gaming.
“Frankly, I think people who drew down on early access superannuation due to genuine hardship would find it hard to find the available funds for a top up but I do believe they should be given an incentive to do so if they can,” he said.
However, Mason reflected the views of some superannuation fund executives when he expressed doubts over whether sufficient information was being held by the ATO to preclude gaming of any waiving of contribution caps to encourage top-ups.
The ATO in the middle of last year issued a warning over how people used the early release scheme, referring to “a handful of people who try to take advantage and exploit the system for their own financial gain”.
“We will not tolerate anyone engaging in illegal behaviour or developing contrived schemes designed to take advantage of the COVID-19 stimulus packages. Where people deliberately exploit the system, we will take action. We've already seen some examples of people doing the wrong thing, and we've acted quickly and decisively.”
Recommended for you
Government has introduced a bill to Parliament to legislate the first stream of the QAR reforms.
ASIC now has a 1:1 ratio when it comes to court success in the enforcement of crypto activities and more action is expected as Treasury seeks to introduce a regulatory framework.
A leading governance body has hit out at “specialist interest groups proposing ad hoc law reform” when it comes to reforms of financial services legislation and believes an independent body is needed.
The release of ALRC’s final report into financial services legislation has highlighted financial advice as a “significant” focus as it seeks to reduce costs and help advisers understand their obligations, alongside the Quality of Advice Review.