“Beneficial” Frauds

Beneficial” Frauds are Superannuation Frauds that benefit the select few – Senior Company Executives and those who are bribed  to allow the fraud to continue.

In the Superannuation Salary Fraud the Employer runs “two sets of books“, reporting Employees actual salaries to the Australian Tax Office, but substantially lower amounts to the Fund Trustee to determine the final salary Defined Benefit.

The Trustee accepts the salary amounts reported on a “no questions asked basis“.

Consider a Government Regulated Superannuation Fund with around 500 Members and $200 million in assets.

If the Trustee administered the Fund strictly in accordance with the Trust Deed and Governing Rules, typical benefit payments would be as follows:

The liability for these benefit payments matches the assets of the Fund at $200 million.

Since the Senior Executives control the flow of salary information to the Trustee, they can easily boost their own superannuation benefits by falsely reporting much higher salaries for themselves to the Trustee.

So that total benefit payments still match the Fund’s assets at $200 million, lower “Superannuation Salary” amounts are reported for all other Employees as shown below.

In this case the typical Employee loses $30,000 or 8% of their lawful entitlement, while the CEO scores an extra $5 Million and the other Senior Executives collect an extra 66%.

The Employees are simply bluffed that “Superannuation Salary” has some legitimacy and are none the wiser that the CEO and Senior Executives have cleaned up at their expense.

The “Independent” Fund Auditor notes that Assets match Liabilities and signs off his Audit Report.

This is a classic “gatekeeper” fraud, since the gatekeeper, the HR Manager, controls the flow of information to the Trustee, the HR Manager can report whatever salary information he or she likes.

How common do you believe this fraud is?

Have you been subsidizing the superannuation benefits of the Senior Executives in your Company?

To find out become a Member of Australian Guardians today.

Membership is free.

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