Illegal early access refers to assets being removed from a self-managed super fund (SMSF) early without a condition of release being met.
Superannuation savings are important to the community and provide funds for people’s retirement; even a small amount of illegal early access can have a significant impact on an individual's retirement savings.
For 2020–21, we estimate SMSF illegal early access to be $256.1 million.
Self-managed super funds
A SMSF is a way of saving for retirement. The members run it for their own benefit. They make the investment decisions for the fund and are held responsible for complying with the super and tax laws.
A SMSF must be run for the sole purpose of providing retirement benefits for the members. Additionally, all decisions made by members as trustee of their fund must be in the best financial interests of the members.
As at December 2023, there were 614,705 SMSFs with total estimated assets of $913.7 billion.
About the estimate
The SMSF illegal early access estimate combines estimates for non-lodging and lodging funds. It forms part of our overall tax and super performance program, and measures the ‘asset gap’ between:
- what should be held in super, and
- what has been illegally accessed.
The illegal early access estimate was calculated in a similar way to other gap estimate amounts of taxes that are not collected. Find out about the concept of tax gaps and the latest gaps available.
The 2020–21 SMSF illegal early access estimate of $256.1 million has decreased compared to the 2019–20 estimate of $380.5 million. Most of the decline occurred in the non-lodging funds.
This may be attributable to a range of factors, including:
- economic factors
- possible changes in compliance
- ATO actions.
Table 1 shows:
- Compared to the 2019–20 estimate, the 2020–21 estimate has materially reduced by about $124 million, mainly due to a reduced estimate for the non-lodgers.
- The estimate as a percentage of total SMSF assets has reduced from 0.05% to 0.03%.
- Over these 2 years, the total assets have increased by $123.2 billion.
Element | 2019–20 | 2020–21 |
|---|---|---|
Non-lodger population size | 14,964 | 24,955 |
Non-lodger population illegal early access estimate ($m) | 283.0 | 174.4 |
Lodger population illegal early access estimate ($m) | 97.5 | 81.7 |
Combined illegal early access estimate ($m) | 380.5 | 256.1 |
Combined total assets ($b) | 720.5 | 843.7 |
Combined estimate as percentage of combined total assets | 0.05% | 0.03% |
Findings
Illegal early access is the most significant regulatory risk impacting the SMSF sector.
The estimate in both lodging and non-lodging funds is likely driven by a wide set of circumstances, such as:
- financial stress
- promoters and schemes
- lack of knowledge
- community attitudes to super.
The estimate for lodging funds is less than for non-lodging funds. This reflects enhanced controls, with these SMSFs being reviewed by approved auditors prior to lodgment.
The calculation estimates that 22.1% of the assets of SMSFs that never lodge have been early accessed. This contrasts with lapsed lodgers and lodgers, where the analysis showed only 0.44% and 0.01% respectively of assets leaving the system through illegal early access.