Granting unprecedented access to Australia’s $3 trillion retirement savings, the federal government’s early access scheme was clearly a desperate measure for desperate times.

After all, more than 2.3 million Australians anxiously withdrew up to $10,000 of their own money last financial year, with more expected to do so again in this one. However, despite waving these transactions through, the ATO is now threatening to recoup ineligible ones through taxes and heavy fines, having done little due diligence in the first place.

Early comparisons to the government’s unlawful robodebt scandal are already being made, as many are left scratching their heads over who should ultimately be penalised.

Some Australians admit they did the wrong thing, others say they have found themselves in the tax office’s crosshairs through no fault of their own.

These are the people who now fear they will become collateral damage in a scheme that was deeply flawed from the beginning.

Some thought their application would actually be assessed by the ATO

When the scheme lowered the drawbridge on a heavily-fortified $3 trillion nest egg, many Australians didn’t realise quite how hastily it had been done.

Kathryn, a 31-year-old teacher, was one of them. As concerns around COVID-19 grew, she became “nervous and scared” she and her partner would lose their jobs and be unable to pay back around $6,000 worth of debt they owed on credit cards and to buy now pay later companies like Zip.

While she wasn’t quite sure whether or not she qualified to withdraw super, she applied anyway, thinking the ATO would ultimately make the call.

“At the time, I thought that if I wasn’t eligible [they] would deny the claim and that would be that. But they approved it,” she told Business Insider Australia.

“I never heard directly from the ATO about it, and I 100% did not intend to gain access to my fund fraudulently.”

She, like many others, may have inadvertently done just that – not knowing that the ATO did almost no due diligence of its own to verify claims.

The ATO itself has done little to correct this idea. It sent out more than 2.3 million notifications to successful applicants which read: “After careful consideration, we’ve determined that you are eligible”.

The tax office doesn’t explain that this “careful consideration” only pertains to outright fraud and theft, with even its effectiveness on that front under question.

Having discovered they were never properly assessed, Kathryn and others are worried fines will put them in a worse financial position than when they started.

Nick, another recipient also used his withdrawal to pay off old debts, wishes the government had been more transparent about the process.

“If I had been told that the ATO wasn’t actually looking at applications but would be coming after you with a microscope after the fact, I wouldn’t have touched the money in the first place,” he said.

Some aren’t sure whether or not they have broken the rules

While it’s pretty straightforward to tell if you have a job or have been made redundant, not all of the government’s rules are so clear cut.

Meet Adrian, a crane operator, who took out $10,000 while temporarily laid off. While confident he didn’t break the rules as a registered JobSeeker, he’s now concerned he might be pushing it if he applies for a second instalment, as he balances a volatile workload with welfare.

“I have always declared my earnings, and in the last month have actually been earning good money and haven’t received a JobSeeker payment [as a result],” he said.

“But this week, both companies have gone cold with work and I’m not guaranteed any work from either of them. It is always uncertain. One week I can take home $1,800 and the next $0, without any guarantee.”

With unemployment rising in the construction sector, Adrian wants to access another $10,000 so he can keep paying his bills if work dries up for good, but he doesn’t want to run afoul of the law or risk a fine.

The ATO has not published guidance on complex situations like Adrian’s. Instead, it recommends people reach out for help if they are unsure.

“They should seek the assistance of a tax professional or contact us to let us know,” a spokesperson said.

Eligibility is not synonymous with need

With the federal government needing to draw the line somewhere with its eligibility criteria, there were ultimately always going to be Australians who missed out. People whose financial position fit the purpose of the scheme, but whose particulars did not fit its design.

Robert is one such case. The 34-year-old Australian was working in Canada when the coronavirus began spreading around the world. As he watched countries, including Canada and Australia, move to close their borders, his dread began to rise.

Ineligible for Canada’s own unemployment support scheme, he prepared an emergency fund with close to $10,000 courtesy of his superannuation savings back home.

“With my work visa expiring in January 2021, I wanted to be sure I was financially set to be able to return to Australia for a potential self-quarantine period as well as a lengthy unemployment period given current job losses,” he told Business Insider Australia.

With real unemployment in Australia now well above 11% and return journeys increasingly difficult, his fears were well-founded. Fortunately, his work schedule went unchanged and his rainy day fund remains basically untouched.

“I am a little concerned I will be deemed ineligible should the ATO look into my case, but also feel there will be a large volume of people and applications to go through and I might be missed or passed over,” he said.

The goalposts shifted for foreign workers

Robert’s situation is like so many others, including temporary foreign workers in Australia.

Having received little support from the Australian government other than the suggestion to head home, many were rightfully concerned about what they would do if they were suddenly laid off.

When John, one of the 1.2 million Britons living in Australia, heard rumblings within his company, he feared how his family might cope and withdrew the full $10K.

“Given that I had just been told to take leave and didn’t know when that would end, I decided to make a withdrawal in case I’d get fired and needed to buy plane tickets for my wife and myself back to the UK,” he said, calling it a “scary time”.

While his forced leave finished up after just a few weeks, he says he did need to use between $3,000 and $4,000 to see the pair through uncertain times.

He’s now concerned the rules changed under his feet.

Originally, the criteria for temporary skilled workers to qualify were a 30% reduction in hours, a box John ticked. However, the federal government later reneged, restricting access to those in “severe financial hardship”.

While the ATO confirmed to Business Insider Australia that applicants would only be measured against their situation and the official criteria at the time of their application, it’s yet another source of anxiety for many with plenty on their plate already.

Some knew they weren’t eligible, but simply wanted their money

Plenty of workers withdrew their super despite knowing they weren’t technically allowed.

Simon is one such case. On hearing about the scheme, he jumped at the chance to get hold of a chunk of his super – a small amount that was otherwise decades away from his reach.

“I said I lost 20% of my wage, but I didn’t,” he told Business Insider Australia. “It was just so easy to get it.”

He took out the full $10,000, of which he used nearly $9,000 to pay back an expensive personal loan he took out a few years ago.

“The only reason I did it was to pay my loan back, so I had some money to start living again.”

There are no doubt many like Simon. Some spoke with Business Insider Australia on the condition of anonymity and expressed utter disbelief that they could be punished for accessing their own money – during a recession, no less.

Simon says he’s now worried the ATO will figure it out and he’ll find himself slapped with a sizeable tax bill. Having spent the remainder, he says he wouldn’t have the savings to pay any back – or a $12,000 fine, for that matter.

Some are frustrated there isn’t an option to simply pay back the money

It’s clear many have only just realised they could be in the wrong.

With an ATO review now well underway, those who still have the money on hand say they’d be happy to return it to their super fund.

While there’s no option to do so as part of the scheme, several people told Business Insider Australia that they were going to make voluntary contributions to feed the money back into their super.

Such a tactic could actually land them in even more hot water.

That’s because the ATO has made it clear it is saving the harshest penalties for those who use the scheme for “the purpose of obtaining a tax benefit”.

Voluntary contributions to super can earn a personal tax deduction. By withdrawing super under the scheme and putting it straight back in, unwitting punters could stumble upon a possible tax loophole.

While the ATO has been clear in warning Australians not to exploit it, the average Australian could be forgiven for not being familiar with the “general anti-avoidance rule for income tax”.

None of those who floated the idea realised there was even a tax benefit to be had, let alone that they would only be making things worse by trying to undo their mistake.

The scheme’s audit is already being compared to the government’s robodebt scandal.

Jennifer is a single mother living with type 2 diabetes. Her application to withdraw super was made with the hope it would pay for some medical appointments she needs but hasn’t been able to afford.

“I don’t have private health insurance and need to find the money from somewhere to pay for this,” she said.

She thought her approval meant she had been found eligible. However, she now fears a penalty after realising that permanent residents are classed as ‘temporary’ under the taxation system and she probably didn’t qualify after all.

“I genuinely thought they would check,” she said.

“Interestingly enough, I have also just been sent a letter by Centrelink saying I am included in the class action to get money back which has been unlawfully taken from people through the government’s robodebt algorithm,” she said.

The robodebt scandal, which saw nearly half a million unlawful debts automatically issued to welfare recipients, hurt some of the most vulnerable members of society. It’s unsurprising that parallels are already being drawn between it and the ATO’s incoming audit of the super withdrawal scheme.

“I think the government needs to rethink how they are doing things. It’s obviously not working well for them,” Jenifer said.

What happens now to those waiting for a knock on the door?

Many who spoke to Business Insider Australia about honest mistakes are frustrated, feeling they have been left in the lurch.

Some, like Adam, are incredulous they are in this situation at all.

“In my opinion, the ATO should have means-tested the claims, properly one by one,” he said. “They should fall on their own swords for this and not shift the blame onto those who took the opportunity offered to them.”

A spokesperson for the agency said the agency believes “the vast majority of applicants have done the right thing.”

“We know that people make mistakes. By taking the initiative and contacting us, we can help you resolve the issue with empathy and understanding,” they said.

“If you have applied knowing that you did not meet the eligibility criteria, we strongly encourage you to get on the front foot and contact us to make a voluntary disclosure. It’s a lot easier to work through a resolution than waiting to be contacted when we start an audit.”

However, while perhaps the best option, there’s palpable anxiety amongst applicants when it comes to the subject of going to the ATO, fearing they’d only be sticking their neck out.

Either way, the ATO has a far more sophisticated approach for tracking people down than it does for screening them in the first place.

“We use a range of data sources to help us identify where there may be a risk that someone has not met the eligibility criteria. Where there is a high risk, we may contact those individuals and review their evidence supporting eligibility,” a spokesperson said, noting that review has already commenced.

Having taken their super out to see them through uncertain times, hundreds of thousands of Australians are now nervously awaiting even worse news.

Are you familiar with the ATO’s internal review process and know more? Get in touch securely with [email protected] | Anonymity possible.

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