By Christian Pakpahan, Lawyer and Daniel Butler, Director, DBA Lawyers
On 17 July 2018, Treasury released exposure draft regulations to broadly extend the operation of SuperStream to cover self-managed superannuation funds (SMSFs). Currently SMSFs only need to be able to receive contributions and rollovers through SuperStream.
Currently SMSFs are only required to be able to receive arm’s length employer contributions, including any relevant data/information, using SuperStream.
Accordingly, SMSFs that do not receive arm’s length employer contributions, such as SMSFs that may only have contributions from related-party employers (eg a family business), are not required to use SuperStream.
At this point the Superannuation Industry (Supervision) Regulations 1994 (SISR) provide that, apart from SMSFs, all superannuation funds should:
- (1) provide information to the ATO using SuperStream, and
- (2) transfer payments to other superannuation funds using SuperStream.
However, the exposure draft proposes to extend these requirements to SMSFs.
If the exposure draft is made law, SMSFs will be required to provide data/information to the ATO and conduct transfers or rollovers with other superannuation funds (ie APRA funds or other SMSFs) using SuperStream from 30 November 2019.
Providing information to the ATO using SuperStream
SMSFs will broadly need to give the following information to the ATO:
- • a unique superannuation identifier (eg Australian Business Numbers (ABN))
- • bank details that can receive electronic payments, and
- • an Internet protocol or other digital address (ie an electronic service address (ESA)) that can facilitate SuperStream communication.
An SMSF can obtain a SuperStream ESA through an SMSF message provider, SMSF administrator, tax agent, accountant or bank. The ATO provides a register of SuperStream providers on its website.
This measure will broadly enable the ATO to obtain the ESAs of all SMSFs and have more up-to-date data on each SMSF’s electronic records. In the media release accompanying the exposure draft, the then Minister for Revenue and Financial Services, Kelly O’Dwyer, broadly stated that the benefits of this would include reduced compliance costs for SMSFs by reducing current manual paper-based processes and improving the integrity of the superannuation system by increasing the ATO’s ability to verify SMSF data. This will be particularly beneficial for the ATO’s SMSF verification service, which APRA funds generally use before processing an SMSF-related rollover.
SMSF rollovers to other superannuation funds using SuperStream
Division 6.5 of Pt 6 of the SISR broadly prescribes which superannuation fund rollover or transfers between superannuation funds are subject to SuperStream. If the exposure draft is made law, the general exclusion of SMSFs from the operation of Div 6.5 will be removed.
If this is removed, the SISR prescribes that in regard to rollovers or transfers between superannuation funds, the transferring fund must use SuperStream regardless of whether the superannuation fund is an SMSF.
Among other things, this will require a transferring SMSF to receive a rollover/transfer request electronically, verify and validate the member’s details and rollover/transfer the relevant amount pursuant to SuperStream. Also, under SuperStream there is a requirement to broadly rollover the relevant amount no later than three business days after a superannuation fund receives a rollover request. This requirement initially did not apply to SMSFs, however, as SuperStream will be extended to SMSFs, it appears at this stage that SMSFs will also need to adhere to a three business day rollover period.
All SMSFs will need to be compliant with SuperStream
If the current exposure draft passes as law, by 30 November 2019, SMSFs will need to be compliant with SuperStream, not just in regard to receiving contributions but also in regard to transmitting information to the ATO and in relation to rollovers and transfers.
[This article was originally published in CCH Tax Week on 14 September 2018. Tax Week is included in various tax subscription services such as The Australian Federal Tax Reporter and CCH iKnow – Income Tax module. CCH Tax Week is available for subscription in its own right. This article is an example of many practitioner articles published in Tax Week.]