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Super scams: What to look out for

Super scams: What to look out for

Saving up for retirement is tricky enough without any extra hurdles thrown into the mix. Between juggling various costs, coming up with different superannuation strategies and even recovering lost super, the landscape of retirement saving can be a treacherous one.

Add on top of this the existence of unscrupulous individuals who try to take advantage of hard-working Australians by running superannuation scams, and you’ve got a potential minefield to navigate through. 

As with any part of the financial world, scams exist in superannuation too, and in the worst case scenarios can be financially crippling. All it takes is a little bit of education, however. If you get informed about the scams out there and how they work, you can more easily avoid them and keep your finances secure. 

How do superannuation scams work?

One day, you might get a call from a financial adviser who wants to talk to you about your superannuation funds. They offer you a once-in-a-lifetime deal: For a small fee, they’ll obtain for you an “early release” of your super, and maybe move it to a self-managed super fund. You can then use the money for whatever you want — to pay off a loan or put it toward an investment — and the only other thing you’ll need to do is sign some paperwork. 

Before you know it, your hard-earned super money has disappeared and you can’t get hold of this financial adviser anymore. It seems you’ve just been scammed.

What are the potential consequences?

The most immediate effect of such a scam is that you may have just lost the tens or hundreds of thousands of dollars of super you’ve been patiently putting away over the years. Suddenly, your secure retirement is in jeopardy. Even if the authorities catch the scammer, they may not be able to give you back the money.

If that weren’t enough, you might also suffer large tax penalties for accessing your super early, and you might face legal action for having undertaken an illegal procedure.

All in all, the circumstances are far from rosy. 

How can you spot a scam?

First of all, avoid any advertisements or offers that promise you a quick and easy way of accessing your super early. In reality, by the superannuation rules, you cannot legally gain access to the preserved part of your super until you’re 55 at the very earliest. According to the Australian Competition and Consumer Commission (ACCC), only compassionate consideration or severe financial hardship prove exceptions to the rule.

But you should also be wary of any individual who is pressuring you into making an immediate financial decision, pushing you to give personal information without checking their validity. Chances are, if it sounds, looks and feels like a scam, it probably is, so never agree to anything and always get independent advice first. 

If you do find that you’ve been scammed — or have been approached with a scam — report the culprit. Contact either your fund, the Australian Tax Office, the Australian Securities and Investments Commission, the Australian Prudential Regulation Authority or the ACCC’s SCAMwatch. 

This way you can help prevent further repercussions, for both yourself and future innocents.

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Learn more about superannuation

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

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If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

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Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

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Can I take money out of my superannuation fund?

Superannuation is designed to provide Australians with money in their retirement. The government has strict rules around when people can take that money out of their fund because it wants to prevent people eroding their savings before they reach retirement.

As a general rule, you can only take money out of your superannuation fund when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

That said, you can take money out of your superannuation fund early based on one of these seven special conditions:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

What is superannuation?

Superannuation is money set aside for your retirement. This money is automatically paid into your superannuation fund by your employer.

How is superannuation regulated?

The Australian Prudential Regulation Authority (APRA) regulates ordinary superannuation accounts. Self-managed superannuation funds (SMSFs) are regulated by the Australian Taxation Office.