4 common super scams and how to pick them

4 common super scams and how to pick them

The billions of dollars pouring into superannuation savings are irresistible to investment scammers so it helps to be aware of what’s out there trying to get at one of your biggest assets.  We’ll say it upfront: if it sounds too good to be true, it usually is and the key to avoiding any scam is talking to your adviser first.

The push to set up a SMSF

We’ve all seen the stories about property-spruiking opportunists urging investors to set up a self-managed superannuation fund (SMSF) to buy property with as little as $30,000 in the fund.

Their typical target is usually Small business owners, self-funded retirees, or property investors aged more than 50 who are looking to put significant amounts of money into super, usually through a SMSF.

Setting up a SMSF is a serious enterprise that requires a lot of thought and commitment. Running your own SMSF can require serious work to match or better the outcome of dedicated fund managers, can incur many more costs and entails a personal liability as the trustee of the fund. Furthermore investing in property in an SMSF can be a minefield as many people have seen, getting conned into buying properties in mining towns etc.

Other common superannuation cons

A range of illegal actions are on the Australian Taxation Office’s (ATO) radar, including:

1. Dividend stripping: taking tax-free profits, with shareholders in a private company transferring ownership of their shares to a related SMSF so the company can pay franked dividends to the SMSF.

2. Early release: offering consumers access to super funds through a SMSF before the legal release age, and taking a substantial fee for themselves.

3. A non arm’s-length limited recourse borrowing arrangement (LRBA): a SMSF trustee undertakes an LRBA where the lender may be a related party and the loan is not consistent with arm’s length dealing.

4. Personal services income: individuals divert income earned from their personal skills to the SMSF in a bid to have the money concessionally taxed or treated as exempt from tax.

The ATO has asked advisers like us to stay vigilant and blow the whistle on any arrangements that are artificially contrived and complex, involve a lot of paper shuffling, seek to leave the taxpayer with minimal or zero tax, or aim to give a present-day benefit with the aim being be to ensure that investors don’t inadvertently fall prey to a risky scheme that could see their retirement nest egg jeopardised.

This problem is so severe that The ATO has also launched a program called Project Super Scheme Smart to educate the public on tax avoidance schemes and potential scams.

Watch out for …

At the end of the day remember what we said in our opening: if it sounds too good to be true it usually is and to contact your adviser if you’re not sure.

In deciding if you wish to make a jump investing with your SMSF here’s some things to watch out for and be aware of:

  • Websites, especially overseas sites, promoting seemingly legitimate investment schemes that operate without an Australian Financial Services Licence (AFSL).
  • Misleading claims about the benefits of SMSFs on websites, through social media and in promotional material.
  • If a SMSF member loses money due to theft or fraud, they are not entitled to any special compensation schemes and do not have access to the Superannuation Complaints Tribunal to resolve disputes.


Not sure if your SMSF is being run the right way or want a second opinion? We’re here to help – contact us on 02 9633 5530 or by submitting a request here


Please note this information is general advice only. Please seek advice before acting on any information in this article

Sacha Loutkovsky
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