As Christmas nears, the ATO encourages Aussies to stay smart with their holiday spend

As Christmas approaches, super funds can be a tempting way to make the holidays more festive.

But before dipping your hands into your super, the Australian Taxation Office has a reminder for you: the consequences could include additional tax, penalties, loss of retirement savings and disqualification as an SMSF trustee.

The ATO will focus heavily on illegal early access in its 2025-26 priorities, with officials noting that they've seen an upward trend in early super access.

It's a costly mistake that's landing more Australians in serious financial and legal trouble.

The real cost of Christmas 'borrowing'

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When the ATO discusses penalties for unauthorised super access, they're not referring to a slap on the wrist.

Penalties are assigned in units ranging from five to 60, with each penalty unit currently costing $330. This means that breaches can result in fines ranging from $1,650 to a whopping $19,800.

If a member illegally accesses their super, the amount taken out of their super will be included in their assessable income.

It will be taxed at the top marginal rate of 45 per cent, rather than the concessional super rate of 15 per cent.

So, if you 'borrowed' $10,000 for Christmas, it could cost you $4,500 in additional tax, plus penalties, plus the lost growth on that money in your retirement fund

No mercy from the tax office

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Perhaps most concerning for anyone tempted to 'borrow' from their super with plans of immediate repayment, the ATO will not exercise discretion where there is an attempted rectification by repayment. Any amounts paid back would be considered either concessional or non-concessional contributions.

Money taken out of the fund that results in a breach can never be rectified, even if it is repaid within days, weeks, or months.

The numbers tell the story

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There has been a growing number of SMSFs falling behind their lodgement obligations, and the ATO is aware that late lodgement often signals compliance issues.

Deputy Commissioner Emma Rosenzweig noted that while only three to four per cent of SMSFs that lodge returns report contraventions, they expect that a significantly higher proportion of non-lodgers have broken the rules.

In the last financial year, over 500 SMSF trustees were disqualified for illegally accessing their super funds. This disqualification remains on a permanent public record, affecting your potential to hold other financial positions.

Warning signs the ATO watches for

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The tax office has sophisticated systems in place to detect potential non-compliance.

The ATO considers non-lodgement of annual returns a red flag for non-compliance, including illegal early access to superannuation.

The ATO also noted an increase in contraventions related to both loans to members and illegal early access being reported, and they're concerned about advisers telling clients to treat illegal access as loans.

Better ways to fund Christmas

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Rather than risking your retirement and facing penalties, you may consider these alternatives.

According to data, Australian households expect to spend around $2,200 on Christmas. Still, many are being strategic about timing their purchases around sales periods, such as Black Friday and Boxing Day, to stretch their dollars further.

You may risk losing some or all of your retirement savings and incur severe penalties if you try to access your super early. Additionally, you could be disqualified as a trustee, which could result in your fund being wound up.

Christmas comes every year, and with proper planning, you can enjoy the festive season without jeopardising your retirement security.

Your future self will thank you for keeping that super money exactly where it belongs.

So, how are you managing your Christmas spending? Have you found particular budgeting methods that work well for the festive season? Share your tips in the comments below—we would love to hear your holiday strategies!