Superannuation funds whose members have been subject to fraud as a result of the workings of the Government’s hardship early release regime will have to contemplate whether to mount a challenge over who should pay for the mistakes.
While a number of superannuation fund executives have told Super Review that the likelihood is that the funds will make good member losses via their so-called member’s reserve, they said this did not address the moral question of superannuation fund reserves being used to compensate members for mistakes which were largely beyond their control.
The issue of moral responsibility for the early release frauds has arisen amid reports that scammers have been using shortcomings in the Government’s MyGov regime and that the Australian Taxation Office (ATO) has, in some instances, signed off on early release with respect to fraudulent claims.
What is more, the reports suggest that a number of the people against whom the frauds were perpetrated were not eligible for early release in any case.
The chief executive of small industry superannuation fund, NESS Super, Paul Cahill said that the relatively small size of the fund meant that it had been able to process the early release claims and do its due diligence on the validity of those claims.
“But that is much harder for larger funds and it raises the question of who should ultimately be liable in circumstances where funds are acting on the sign-off of the ATO and the consequent data and authorisations,” he said.
Another superannuation fund chief executive said that where mistakes occurred under the conventional early release regime it was easier to apportion blame because the funds or their administrators were likely to be responsible.
The Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume has been interviewed on national television and has defended the Government’s position and the design of its early release scheme.
She suggested that criticism of the arrangements by superannuation funds was attempt to “throw grit in the wheels to slow the process down”.