Is your superannuation money safe from the ATO?

In the event that you owe money to the ATO, it appears that your super fund is not out of their reach. The ATO has the power to collect monies owed directly from third parties who owe or hold money to or for the debtor. This would seem to include monies held by superannuation funds.

The ATO has the ability to collect money from third parties through what is known as a garnishee notice. The ATO may serve a garnishee notice on a superannuation fund. However, they will not be able to obtain any money from superannuation until the debtor’s benefit becomes payable under the rules of the fund (e.g. retirement or death). Usually, a notice that is served on a superannuation fund will request the amount to be paid in a lump sum, unless the pension or annuity can guarantee repayment within a reasonable period.

How can you avoid your superannuation funds being taken away from you?

–          Paying your taxes will clearly avoid any need for garnishee notices to be issued against you.

–          Use an overseas superfund, as garnishee notices have only seemed to work in Australia.

–          It is arguable that if your super fund only holds real property, then the ATO will not have the authority to convert the real property into money.

–          Declare bankruptcy prior to the ATO issuing a garnishee notice. The ATO will not issue these notices after you declare bankrupt. However, if they are able to obtain a garnishee notice prior to you declaring bankrupt, the notices are still valid, but will only be applicable to amounts that were payable prior to the date of bankruptcy.

For more information in relation to the topic discussed in the article above, please contact The Quinn Group on 02 9223 9166 or fill out an online enquiry.