Compassionate release of super is available only in limited circumstances and should be viewed as a last resort.

In recent years we’ve seen a continuing increase in the number of applications for Early access to superannuation^[1]. on compassionate grounds. Although there has been a slight decline in applications this year, the total value approved increased to a record $1.46 billion.

Compassionate release of super is available only in limited circumstances and should be viewed as a last resort, when all other options have been exhausted. However, we continue to see third-party facilitators and some health practitioners encouraging individuals to access their super early.

Your clients may not fully understand the financial and tax consequences of accessing their super early. They may not be aware of the tax withheld from payments, the impact on their retirement savings, or the potential effect on government payments and benefits – now and in the future.

Tax professionals can play an important role in helping clients make informed decisions before applying for compassionate release of super. If your client is planning to access their super early, we encourage you to help them understand:

• the tax consequences, including
  • approved amounts are generally considered assessable income
  • tax may be withheld by the super fund
  • it may need to be reported in their tax return
• changes to their taxable income may affect their eligibility for government payments and benefits. Encourage clients to contact their super fund before applying to find out how much tax may be withheld, any fees that may apply and how the withdrawal will affect any insurance cover connected to their super account
• the long-term effect on their retirement savings, including the loss of future earnings on withdrawn amounts
• there are consequences for people who deliberately submit false, misleading or fraudulent applications.

Encourage your clients to seek financial advice before deciding to access their super early.

———-

Notes:
[1] https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super

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ATO Deputy Commissioner Ben Kelly said while the latest data is promising, the ATO remains concerned that health practitioners and third-party facilitators continue to utilise predatory practices to get individuals to inappropriately access their super for financial gain.

‘Australians need to remember that super is there to set you up for retirement and there are strict and limited situations where people need to access their super early to pay for critical medical procedures,’ Mr Kelly said.

‘Our message to individuals and medical practitioners is clear – compassionate release of super should only be considered as a last resort, where all other options of paying for the eligible expenses have been exhausted.’

The ATO has been working with the Australian Health Practitioner Regulation Agency (Ahpra) to ensure applications to pay for health-related expenses are appropriate and do not take advantage of vulnerable people.

Ahpra CEO Justin Untersteiner said registered health practitioners should never put profits ahead of patients.

‘We are concerned by predatory sales tactics that use social media and internet advertising to attract patients for high-cost treatments they do not need or cannot afford,’ Mr Untersteiner said.

It is important that individuals understand the immediate tax consequences^[1] of accessing their super early. Approved amounts withdrawn may be taxable and increase reportable income, which could affect eligibility for government payments such as the Family Tax Benefit.

While application volumes have declined from last year’s figures, the total value approved has increased by 2% to over $1.4 billion.

The ATO continues to crack down on health practitioners and third-party facilitators, including dentists, who encourage individuals to inappropriately access their superannuation to fund cosmetic dental procedures.

‘A concerning trend we’re seeing are business arrangements that target and pressure people to access their super to pay for certain procedures,’ Mr Kelly said.

‘These arrangements include short online consultations and the use of templates designed to streamline the process for people to access their super.’

‘People should be very cautious of advertisements that promote early access to super. Taking the time to understand the risks and notice the red flags^[2]  can help avoid decisions that could significantly impact your retirement savings or result in penalties.’

This year, the ATO ramped up its compliance activities, targeting individuals, health practitioners and third-party facilitators who promote these schemes. Since 1  July 2025, the ATO has commenced over 160 reviews and audits where we consider false or misleading statements have been made in applications or medical reports, imposing penalties of over $1.5 million.

‘We believe the decline in applications shows our compliance actions are having an impact. Our message is being heard – we will actively hold all individuals and businesses involved in these arrangements to account and deter those who seek to exploit the system,’ Mr Kelly said.

‘We will continue to take strong action against third party facilitators who seek to exploit or undermine the system, protecting its integrity for those who need it most.’

Where Ahpra has evidence of practitioners providing fraudulent or misleading information to the ATO, the individuals may be referred to the relevant tribunal for alleged professional misconduct. This has already resulted in a practitioner having their registration suspended in relation to a patient’s cosmetic surgery, while other practitioners are the subject of ongoing tribunal proceedings.

Mr Untersteiner said Ahpra continues to receive notifications raising concerns about practitioners involved in the early release of superannuation. In addition, Ahpra proactively monitors practitioners to ensure they are meeting their professional obligations.

‘Practitioners should know that putting profits before patients is not only unsafe – it could cost them their right to practise,’ Mr Untersteiner said

‘Most practitioners do the right thing, and we welcome any signs that inappropriate use of superannuation is decreasing.’

To reiterate the required professional standards, Ahpra and the National Boards have issued compassionate release of superannuation guidance^[3] for practitioners as well as consumer resources^[4] developed by the Dental Board of Australia. More recently, Ahpra and the National Boards have issued conflict of interest guidance^[5].

More information on the strict eligibility requirements^[6] that must be met for the release of super on compassionate grounds is available on the ATO website.

Case study: penalties for medical practitioner

The ATO imposed an administrative penalty around $30,000 on a health practitioner for making false or misleading statements in a medical report, that was used to certify a compassionate release of superannuation application.

The health practitioner completed and signed a medical report supporting a patient’s application for early release of superannuation on compassionate grounds.

During an ATO compliance audit, it was revealed the clinical information and other supporting records were false and misleading. A number of statements in the report were found to be inaccurate, including the classification of the patient’s condition and information used to establish eligibility for compassionate release.

Reporting concerns

The ATO encourages anyone who is aware of inappropriate practices such as social media advertising leading to inappropriate early access of superannuation, or health practitioners providing inaccurate medical reports, to make a tip off or a voluntary disclosure to the ATO.

Concerns about a registered health practitioner’s conduct or professional performance can be reported to Ahpra.

———–

Notes:
[1] tax consequences
[2] red flags
[3] compassionate release of superannuation guidance
[4] consumer resources
[5] onflict of interest guidance
[6] eligibility requirements

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Entry by Kim Thu Hoang Nguyen (WA) – 2019

The ATO’s Tax, Super + You competition is a fun and engaging way for Australian high school students to learn about tax and super, unleash their creativity and potentially win some great prizes.

Working as part of a team or individually, students are invited to write, make or film an entry for their topic:

• Junior (Year 7–9): Highlight the value of tax or super (or both) in the community
• Senior (Year 10–12): Your first job, what you need to know about tax and super.

Shortlisted entries in 2019 included raps, songs, animations, video skits and even a boardgame. Check them out and get inspired to be creative this year^[1].

The competition opens 24 May, with entries accepted up until 13 August. The winners will be decided by a judging panel, including guest judge Effie Zahos, one of Australia’s leading personal finance commentators. The public can also vote for their favourite entry in the People’s Choice Awards.

Assistant Commissioner Sally Bektas said she was thrilled to be back on the judging panel.

“Our Tax, Super + You competition has really shown that building financial literacy can be fun and bring out the best in students. I’m so excited to see the entries for 2021,” Sally said.

You can watch Sally explain how to get involved on ATOt ^[2].

Winners of the 2021 Tax, Super + You competition will be announced in September.

More information about the 2021 Tax, Super + You competition.

——–

[1] https://www.taxsuperandyou.gov.au/competition-past-winners-2019
[2] https://tv.ato.gov.au/ato-tv/media?v=bi9or7odf8rg3e

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The number one cause of the ATO disallowing a claim is taxpayers being unable to produce receipts or other documents to support a claim.

The Australian Taxation Office is aware that residential rental property owners may be concerned about how COVID-19, floods, or bushfires have reduced their income. This may be a result of tenants paying less or entering deferred payments plans, or travel restrictions which have affected demand for short-term rental properties. New legislation also affects the tax deductions that owners of vacant land can claim.

Assistant Commissioner Karen Foat explained that whatever the circumstances, the most important first step was to keep records of all expenses. “Without good records, you will find it difficult to declare all your rental-related income in your tax return and work out what expenses you can claim as deductions.”

Reduced rental income

The COVID-19 pandemic has placed property owners and tenants in unforeseen circumstances. Many tenants are paying reduced rent or have ceased paying because their income has been adversely affected by COVID-19.

You should include rent as income at the time it is paid, so you only need to declare the rent you have received as income. If payments by your tenants are deferred until the next financial year you do not need to include these payments until you receive them.

While rental income may be reduced, owners will continue to incur normal expenses on their rental property and will still be able to claim these expenses in their tax return as long as the reduced rent charged is determined at arms’ length, having regard to the current market conditions.

This applies whether the reduction in rent was initiated by the tenants or the owner.

Some owners may have rental insurance that covers a loss of income. It is important to remember that any payouts from these types of policies are assessable income and must be included in tax returns.

Many banks have moved to defer loan repayments for stressed mortgagees. In these circumstances, rental property owners are still able to claim interest being charged on the loan as a deduction- even if the bank defers the repayments.

Short-term rentals

“We recognise that circumstances over the past six months have seen many short-term rentals see cancellations or sit vacant as a result of either COVID-19 or bushfires,” Ms Foat said.

In circumstances where COVID-19 or natural disasters have adversely affected demand, including the cancellation of existing bookings for a short-term rental property, deductions are still available provided the property was still genuinely available for rent.

If owners decided to use the property for private purposes, offered the property to family or friends for free, offered the property to others in need or stopped renting the property out they cannot claim deductions in respect of those periods.

“Generally speaking, if your plans to rent a property in 2020 were the same as those for 2019, but were disrupted by COVID-19 or bushfires, you will still be able to claim the same proportion of expenses you would have been entitled to claim previously,” Ms Foat said.

To determine the proportion of expenses that can be claimed for short-term rental properties impacted by COVID-19 or bushfires, a reasonable approach is to apportion expenses based on the previous year’s usage pattern, unless you can show it was genuinely available for rent for a longer period of time in 2020.

If you or your family or friends move into the property to live in it because of COVID-19 or bushfires, you need to count this as private use when working out your claims in 2020.

Deductions for vacant land no longer available

For the 2020 year, expenses for holding vacant land are no longer deductible for individuals intending to build a rental property on that land but the property is not yet built. This also applies to land for which you may have been claiming expenses in previous years.

However, this does not apply to land that is used in a business, or if there has been an exceptional circumstance like a fire or flood leading to the land being vacant.

So, if you are building a rental property, you cannot claim the deductions for the costs of holding the land, such as interest. However, if your rental property was destroyed in the bushfires and you are currently rebuilding, you can claim the costs of holding your now vacant land for up to 3 years whilst you rebuild your rental property.

Common mistakes

Travel to rental properties

“Last year, we also saw a number of taxpayers make simple mistakes such as claiming deductions for travel to inspect their rental properties,” Ms Foat said.

Residential property owners can’t claim any deductions for costs incurred in travelling to residential rental property unless they are in the rare situation of being in the business of letting rental properties.

Incorrectly claiming loan interest

Taxpayers that take out a loan to purchase a rental property can claim interest (or a portion of the interest) as a tax deduction. However, directing some of the loan money to personal use, such as paying for living expenses, buying a boat, or going on a holiday is not deductible use. The ATO uses data and analytics look closely to ensure that deductions are only claimed on the portion of the loan that relates directly to the rental property.

Capital works and repairs

“Each year, some taxpayers claim capital works as a lump sum rather than spreading the cost over a number of years. Others claim the initial work needed to get a property ready for rent immediately instead of spreading the cost over a number of years,” Ms Foat said.

Repairs or maintenance to restore something that’s broken, damaged or deteriorating in a property you already rent out are deductible immediately. Improvements or renovations are categorised as capital works and are deductible over a number of years.

Initial repairs for damage that existed when the property was purchased can’t be claimed as an immediate deduction but may be claimed over a number of years as a capital works deduction.

Short term rentals

We often see people with short term rental properties claiming for 100% of their expenses when they actually use the property for their own use or provide it to family and friends for free or at a reduced rate. Properties need to be rented out or be genuinely available for rent to claim a deduction.

Factors such as reserving the property or leaving it vacant over peak periods, not charging the market rate and the types of terms and conditions of the bookings are all taken into consideration when deciding if active and genuine efforts are being made to ensure a property is available for rent.

If a property is not genuinely available for rent, you need to limit your deductions to the days when it is.

If you are allowing friends or family to stay in the property at a reduced price, you need to limit your deductions to the amount of rent received for these periods.

Don’t forget to include all your rental income, especially from sharing economy platforms. We are matching data received from these providers to information in tax returns and will be following up discrepancies.

Poor record keeping

The number one cause of the ATO disallowing a claim is taxpayers being unable to produce receipts or other documents to support a claim. Furnishing fraudulent or doctored records will attract higher penalties and may also result in prosecution.

The post Own a rental? – what you need to know this tax time appeared first on AdviserVoice.

The ATO are working closely with super funds to enable them to process payments to their members as quickly as possible. The first batch of applications have been sent to funds.

Applications with incomplete fields cannot be submitted and processed. If an applicant does not provide their BSB number, they will not be able to submit their application without correcting the error.

The ATO are aware that a small number of data discrepancies have been reported by the funds and are working with the funds to investigate and resolve these issues. The ATO does not expect this to cause any delay with individuals receiving their money.

The ATO has confirmed that there has been no privacy breaches.

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Commissioner of Taxation Chris Jordan acknowledged that many people are being heavily affected by the challenging economic conditions created by the outbreak of COVID-19 and that the ATO is standing by ready to help where it can.

The ATO’s Coronavirus page provides easy-to-understand and detailed information about what people need to know or do in order to get access to the tax or superannuation measures as announced by the Government as part of its economic response to COVID-19.

Measures include:

• giving individuals early access to their superannuation
• providing cash flow assistance for employers
• increasing the instant asset write-off, making more businesses eligible
• backing business investment by accelerating depreciation deductions.

Commissioner of Taxation Chris Jordan said “each of the measures have different timings, eligibility, and processes. Some will be applied automatically and others will require an application, so I recommend heading to ato.gov.au/coronavirus to understand what is possible”.

Mr Jordan also reminded the community of other options available to assist businesses impacted by COVID-19 in addition to the new measures announced by the Government.

“In these difficult and uncertain times, the ATO is doing everything it can to reduce stress from tax and super related obligations,” Mr Jordan said.

Options available to assist businesses impacted by COVID-19 include:

• Deferring by up to six months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
• Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
• Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
• Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities
• Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.
• Businesses wanting to utilise any of these options can contact us over the coming weeks. It is not necessary for businesses to contact us immediately.
• Employers will still need to meet their ongoing super guarantee obligations for their employees.

Outside of business, the ATO will also work with individuals experiencing financial hardship, and their tax agents, and will apply appropriate tax relief measures for serious and exceptional circumstances, such as where people cannot pay for food or accommodation.

“If you’re impacted by COVID-19, and require immediate assistance contact us to request support on our Emergency Support Infoline 1800 806 218. If you do not require immediate assistance you can contact us when you’re ready, to discuss your situation”, Mr Jordan said.

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The top categories of tip-offs the ATO has received so far this year have been about:

1. Not declaring income
2. Demanding cash from customers and / or paying workers “cash in hand”
3. Someone’s lifestyle does not appear to match their income level
4. Not reporting sales.

Assistant Commissioner Peter Holt said the results are not surprising.

“We’re hearing loud and clear that people are sick and tired of this kind of dodgy behaviour. Running a small business can be a really tough gig, and when dishonest competitors are cheating the tax system by operating off the books, it’s really unfair and makes it even harder to succeed. It’s also effectively stealing from the community.”

“So it’s hardly surprising that so many people have tipped us off about this kind of behaviour so we can investigate and keep things fair for everyone,” Mr Holt said.

ATO figures show that cafés and restaurants top the list in terms of the total number of tip-offs received in the first quarter this year.

“The proof is in the pudding. Our risk indicators tell us that there is a black economy problem in the café and restaurant industry and the fact that tip-offs about this industry top our list tells us that there is still more work to be done to protect honest café and restaurant owners and workers in this industry”.

“Trading in cash and paying your workers in cash is perfectly legal but failing to report the income to the ATO and not paying your workers their entitlements like superannuation is not only illegal but also incredibly unfair.”

“Regardless of what industry you’re in, if you’re cooking the books, your competitors and workers are probably aware of it. And they’re not hesitating to let us know about it,” Mr Holt said.

“The hospitality industry employs more than 800,000 people and these workers all deserve to be paid their full entitlements”.

“Profit margins in this sector are low, which is probably why some operators think they can top up their bottom line by dealing in cash. But this is a very risky strategy. Cash is not favoured by most customers as a payment method, we all prefer to ‘tap and go’. Also, we know that businesses that deal primarily in cash tend to make more mistakes.”

The ATO also received high volumes of tip-offs about black economy behaviour in the hairdressing and beauty, building and construction, and cleaning industries.

“A tip-off from the community could be the missing piece of the puzzle we need to successfully audit or prosecute someone who is illegally operating in the black economy, so we really value and rely on the community letting us know when something doesn’t add up.”

In one day in early August, the ATO’s Tax Integrity Centre received almost 300 tip-offs.

Tip-offs from New South Wales topped the ATO’s list, closely followed by Victoria and Queensland.

The ATO has a specialist team that looks at each and every tip-off, regardless of whether they are received anonymously or not. Fifty three per cent of people who provided a tip-off in the first quarter of 2019–20 provided their contact details to the ATO, which is a significant increase when compared to the same quarter in the previous year, when only one in four people provided their contact details.

The ATO requests contact details in case information provided needs further clarification, but this is not a requirement.

“Sometimes we may need to ask you about the information you provided. Leaving your name and contact details can help us to do that. We will only contact you for more information if you tell us it’s okay”, Mr Holt said.

“The fact that more and more people are willingly handing over their contact details when they give us a tip-off goes to show that the community has had enough of this kind of mischief. They want to help us uncover and deal with this behaviour.”

Due to privacy laws, the ATO cannot inform people about the progress or outcome of the information they provided.

Members of the community can make a tip-off by:

• completing a Tip-Off form on our website at ato.gov.au/tipoff or in the ‘contact us’ section of the ATO app (which is available from the App store)
• phoning the Black Economy Hotline on 1800 060 062.

The Black Economy Taskforce estimates that the black economy is costing the community as much as $50 billion each year, which is approximately three per cent of Gross Domestic Product (GDP). This is money that the community is missing out on for vital public services like schools, hospitals and roads.

The ATO plans to visits 10,000 businesses this financial year as part of their strategy to deal with the black economy.

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Assistant Commissioner Karen Foat is concerned about a number of people claiming to be tax agents, often promising refunds that sound too good to be true, or providing discounted services much cheaper than legitimate registered tax agents.

“These unregistered preparers pose a threat to vulnerable taxpayers and risk the reputation of registered tax agents” Ms Foat said. “They pretend to offer legitimate services to the community, but in reality they pose a serious threat not only to the people that use them, but to the broader community and the tax system as a whole.”

“Unfortunately, we see too many instances where people have unwittingly used an unregistered preparer, which has resulted in a significant tax debt and loss of money. We also see instances where people do not receive their refund, or where fraudulent claims are lodged in their name without their knowledge.”

Unregistered preparers often use a taxpayer’s personal login details to access their ATO Online account through myGov to lodge tax returns. A legitimate tax practitioner will never ask for your myGov credentials – they use dedicated ATO online services to lodge returns for their clients.

The ATO is working closely with the TPB, as well as law enforcement agencies throughout Australia, to identify and put a stop to unregistered preparers.

“To protect yourself and keep your personal information safe, it is important to check with the TPB to see if an agent is registered. You can easily check an agent’s registration online.

Remember, only registered tax agents can charge a fee to prepare and lodge your tax return” Ms Foat said.

Follow these 3 tips to protect yourself from people falsely claiming to be tax agents:

1. Check your tax agent is registered.
2. Protect your myGov login details and password – you should not share these details with anyone, including your tax agent. Registered tax agents can access the information they need themselves via our portals.
3. Know your tax affairs – you can log into myGov to check your tax affairs at any time, including reviewing your return and refund details, or you can contact your registered tax agent or the ATO.

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It’s time to think about tax.

Tax time begins this weekend, so the ATO has put together a bunch of information to help people get things right.

1. Decide how you’re going to lodge by 31 October

When it comes to lodging your tax return, you can do it either yourself using myTax, the ATO’s online lodgement tool, or use a tax agent.
If you are planning to use an agent for the first time this year, or are using a new agent, make sure you contact them by 31 October. Registered tax agents are the only people allowed to charge a fee to prepare and lodge your tax return.

2. Know what you can claim

To claim a deduction for a work-related expense remember the ATO’s three golden rules:

• You must have spent the money yourself and not have been reimbursed
• It must be directly related to earning your income
• You must have a record to prove it

3. Have your paperwork handy

Having to keep, or maybe find, all your records to prepare your tax return can be a hassle. The ATO app’s myDeductions tool makes it easier and more convenient to keep records of your expenses and income all in one place. If you’re in a hurry, you can use the app to snap a photo of your receipt and add the details later.
At tax time, you can upload your data into myTax to pre-fill your tax return. If lodging with an agent, you can also email the data directly to them.

4. Wait for pre-fill

For many people, waiting for pre-fill to become available means all they have to do is double-check the information the ATO have pre-filled for them, enter any deductions they have and then hit submit.

The ATO says they expect to receive most pre-fill information by August, which means if you can wait until then, completing your own tax return should be even quicker and easier, and you’ll be far less likely to make a mistake.

5. Don’t panic if you make a mistake

It’s not the end of the world if you report something incorrectly on your tax return. If you make a mistake or forget to include something, it’s easy to lodge an amendment online – just go to ww.ato.gov.au/fixamistake.

The post Life hacks for tax: how to make this tax time quicker, easier and simpler appeared first on AdviserVoice.

Second Commissioner Geoff Leeper said the ATO is seeing an increase in the number of sophisticated e-mail and phone scams designed to trick people into giving away their personal details such as tax file numbers, banking and credit card details.

“Scammers can use your personal details to steal your identity and commit fraud such as taking out a bank loan or lodging fake tax returns in your name,” Mr Leeper said.

“I urge people to be vigilant – be wary of unsolicited emails or phone calls claiming to be from the ATO.”

“We will never send an email requesting you to confirm, update or disclose confidential details like your name, date of birth, address, passwords, or credit card details.”

• Q1 2013 (Jan – Mar) –  10,972
• Q4 2012 (Oct – Dec) –  8,770
• Q3 2012 (Jul – Sep) –  6,177
• Q2 2012 (Apr – Jun) –  2,342
• Q1 2012 (Jan – Mar) – 3,558

Tips to protect yourself and your identity

• Protect your identity by protecting all your personal details, including your tax file number.
• Only certain people and organisations can ask for your tax file number. Do not provide your tax file number online unless you are certain about the authenticity of the person requesting it.
• When using social networking sites such as Facebook, Twitter or LinkedIn be careful about the personal information you publish, and customise your security settings to ensure your profile is only accessible to those you trust.
• Ensure your computer has up-to-date security software including anti-virus, anti-spyware, anti-spam and firewall protection to protect your computer from malicious programs.
• Enable automatic updates for your computer’s operating system and applications including your web browser to ensure they remain up-to-date.
• Use a spam filtering product to help block fake emails or emails containing viruses. If you receive a spam email, delete it and do not open email attachments from unknown sources.

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