Millions of Australians withdrew their superannuation early, and now the Australian Tax Office (ATO) is zeroing in on those who took the money without being eligible.
The ATO will send 500 letters to Australians who accessed their superannuation under the government’s hardship scheme, and ask for proof that those savers were eligible for the payment.
Under the scheme, Australians who required financial help to weather the Covid-19 crisis were eligible to withdraw up to $10,000 in the 2020 and 2021 financial years provided they were also unemployed, were eligible for JobSeeker, Youth Allowance or Parenting benefit.
They were also eligible if they had been made redundant this year, their working hours were reduced by at least 20 per cent or as a sole trader, their turnover fell by at least 20 per cent.
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“People who applied for this basically self-assessed, so they basically just ticked the box which applied to them,” H&R Block tax communications director Mark Chapman said, noting that there was no assessment from the ATO at the time.
“Now the ATO is going back and looking at some of those applications to see whether some people might have either deliberately or inadvertently taken the money out of superannuation when they didn’t meet those eligibility criteria.”
The ATO will randomly pick 500 taxpayers who have withdrawn their super and are now asking them for evidence.
Depending on how many people are found to be ineligible in this pilot test, the ATO may begin checking more Australians’ claims.
What will the ATO ask for?
The ATO will basically be asking for proof, Chapman said.
That can be in the form of payslips, letters, rosters or emails from an employer, bank statements, business cash flow records, separation certificates or a public notice that a business has closed. Similarly, documents confirming eligibility for income support payments will also be recognised.
I’ve withdrawn my super, but now I realise I’m ineligible. What next?
“People out there are starting to pop up who are starting to become aware that maybe they weren’t eligible in the first place,” Chapman said.
That includes Australians who might have feared earlier this year that they would lose hours, income or their job and withdrew their super to have some extra cash, only to not see any change in their income.
“They rushed into doing this to give themselves a degree of financial comfort, and now it’s turned out that the worst didn’t happen and they didn’t meet those eligibility guidelines.”
If this is you, Chapman said the best thing to do is to talk to a professional.
If it was a genuine error, the ATO will just include that cash as taxable income. The bad news is that there is no way to put that money back into super once it’s been withdrawn.
“Forget about it… It’s not as simple as just reversing the whole transaction and pretending it never happened,” he said.
“For the people who… unwittingly took their super out, it could prove to be quite an expensive situation down the track.”
And if you’re one of the “unlucky 500” who receive a letter from the ATO in coming months, it’s definitely a good idea to find a professional, Chapman said.
But then there are other savers who withdrew their superannuation while knowing they weren’t eligible.
Again, it’s worth talking to a professional, Chapman said. Australians who withdrew their super while knowing they weren’t eligible will face fines of $12,600 for withdrawing the cash in the 2020 financial year, and another huge fine for withdrawing another $10,000 in the 2021 financial year.
“If they had been misleading in their conduct, so if they ticked one of those boxes where they knew they weren’t eligible, they can also be facing a penalty… which on top of the $10,000 out of super in the first place is a very big financial impact.”