The Contribution Skimming Fraud can be implemented for any type of Government Regulated Superannuation Fund, however it is most effective when applied to a Hybrid Superannuation Fund.
A Hybrid Fund provides two benefits:
- A final salary Defined Benefit, plus
- A “top-up” Accumulation Benefit
The assets of the final salary Defined Benefit Fund are held in a “common asset” pool and not in the names of the individual Members of the Fund. The assets in an “Accumulation” Fund or money purchase Defined Contribution Fund are held in individual Member investment accounts.
The benefit from a final salary Defined Benefit Fund is not directly correlated to Member or Employer contributions, while the benefit from a “top-up” Accumulation Fund or a money purchase Defined Contribution Fund is directly correlated to Member and Employer contributions.
If the final salary Defined Benefit fund has a health surplus and the Employer is enjoying an extended “Contribution Holiday“, then this provides the Employer with the opportunity to implement the Contribution Skimming Fraud.
The Employer advises Employees of the tax effectiveness of making additional contributions under “Salary Packaging” arrangements and Employees are led to believe that these additional contributions will increase their total superannuation benefit. However the final salary Defined Benefit does not depend on specific contributions and so the additional contributions made on behalf of Employees by the Employer can be diverted into a “Profit Improvement Account” which can be used to boost reported profits if necessary by the Senior Executives so that they can claim their annual “performance” bonuses.
Members of the Fund are never provided with proper reconciliation statements so they are unaware of the deception.
If you would would like to have access to the tools that will assist you determine if you have been a victim of the Contribution Skimming Fraud then become a Member of Australian Guardians today
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