Many SMSF professionals are finding out just how difficult it is to sail the rough waters of SuperStream. Unfortunately, the forecast is not good because things can quickly develop into a storm at SMSF audit time.
The reason is that under r6.17 SISR, payment of member benefits must be made strictly in line with Part 6 of the regulations and allowed by the trust deed.
Compliance with Part 6 of SISR
The superannuation data and payment standards stipulate that a trustee must roll over or transfer an amount under sub-regulation 6.34A(2) no later than three (3) business days after they received the request.
Given the teething problems of SuperStream, this leaves SMSF trustees vulnerable to a reportable breach of r6.17 SISR even though the problem may not necessarily be of their making.
One of the crucial issues that affect the efficiency of Superstream is the different requirements of each APRA fund processing the rollovers.
While the obvious question is: “Where’s the mischief?” the SIS legislation does not allow for varying degrees of problems outside the trustee’s control. And the entire purpose of SuperStream is to improve timeliness and reduce administrative costs
SMSF auditors, as a result, must apply strict reporting criteria in line with ATO requirements that will see many SMSFs reported in an Auditor Contravention Report (ACR) for the first time. Of course, they will include mitigating comments where relevant.
A breach of r6.17 SISR also comes with a 20-unit penalty notice, currently worth $222 per unit totalling $4,440 per trustee. Trustees should also be aware that the penalty unit amount will increase on 1 July 2023, indexed to CPI.
The Regulator is well aware of these complications and has already devised an alternative solution to ensure SMSFs continue to comply.
SMSF auditors must obtain evidence that confirms:
- The SMSF received the rollover request (from either the member, the receiving fund or the ATO where the SMSF is the transferring fund)
- The rollover was requested/made via the SMSF/SuperStream (such as a printout from the trustee’s SMSF administration software provider)
- The rollover occurred not later than three (3) business days after receiving all the information required to process the request
One of the ways that SMSF trustees could confirm this chain of events is to prepare a minute to accompany the printout from their SMSF administration software provider.
However, there are certain exemptions to using SuperStream, such as related-party employer contributions paid into an SMSF or where a member makes personal contributions.
Under these circumstances, SMSF auditors will not expect additional confirmation over what is currently accepted.
Problems with SuperStream
To start working with SuperStream, the fund needs:
- An electronic service address (ESA)
- An ABN
- Up to date fund details, including bank account information
The main requirement is to ensure that every aspect of the fund’s digital data has been updated correctly on the ATO database.
The ESA must be active and set up to receive contributions and have the ability to provide rollover SuperStream services as well.
The ABN must also be active and all other SMSF details carefully checked and verified.
Where a fund is winding up, the ATO has extended the timeframe to cancel an ABN from three (3) days to two (2) weeks after lodging the final ITR to help facilitate rollovers.
Other simple proof of identity issues, such as a name change that no longer matches the member’s details from the prior year’s tax return or an incorrectly entered TFN number, will also halt the process.
Another essential criterion is that the fund’s bank account must be unique for super purposes and carefully recorded with the ATO to ensure the transaction gets processed through the SMSF Verification Service (SVS).
Any deviation in the SMSFs data compared to ATO records will stop the rollover or transfer from happening within the required three (3) day timeframe as the SVS cannot validate the data.
One of the key issues with effecting transactions on SuperStream is the limited number of SMSF message service providers with ESAs that allow processing rollovers and release authorities.
Many have been set up to accept and process contributions but have not updated their software to enable rollover and release authorities.
Just over half of the fifteen (15) SMSF messaging service providers listed on the ATO website currently intend to offer both facilities. As an SMSF can have only one ESA recorded on ATO systems, SMSF trustees may have to select a different messaging service provider to process both contributions and rollovers.
The ATO is aware of all the problems preventing SMSF trustees from complying with the required timeframe and has provided an alternative solution.
As a temporary measure, rollovers are allowed outside of SuperStream in the following specific situations:
- SMSF to APRA Fund
- SMSF to SMSF
The caveat is that it only applies only to these two limited circumstances, and SMSF trustees must seek approval from the ATO by requesting a call reference number before the transaction.
SMSF auditors are not required to report a contravention of r6.17 SISR where the trustee provides the ATO call reference number at audit time, potentially recorded via a minute or email.
While the registration status of an SMSF impacts the rollover or transfer of funds, online fraud has made it difficult for new trustees to register their funds.
The reason is that over 25% of individuals identified as high-risk have compromised identities under the ATO’s new registrant program. While some result from criminals trying to enter the super system, some are victims of actual identity theft, making efforts to start a super fund extremely difficult.
The ATO will also remove an SMSFs regulation details from Super Fund Lookup when it is more than two (2) weeks overdue lodging the annual return. Once lodged, the ATO will update the regulation details on the first business day of the following month and listed the next day.
Delays in updating registration status, such as adding a new member to the fund, can take the ATO up to 56 days to complete its checks and significantly affect the timeliness of a rollover.
SuperStream is also generating error messages where employer contributions have been previously paid into the member’s SMSF without incident.
When the employer receives an error message from SuperStream, they will request the member to confirm the fund’s ABN and ESA.
Once again, it may be worthwhile ensuring that all fund details recorded with the ATO are up to date.
Being SuperStream ready is now a fact of SMSF life. Surprisingly, several SMSF messaging providers will not be supplying an ESA for rollovers and release authorities.
SMSF professionals should consider how rollovers and transfers will be processed through SuperStream depending on the messaging provider their clients are using.
While the first hurdles of SuperStream continue to plague the SMSF industry, SuperStream is here to stay. But it is fair to say that the ATO, APRA and the professional accounting bodies do not want to see rollovers held up in transit.
No doubt, the ATO’s temporary measures will help the SMSF industry navigate the rough waters of SuperStream until the storm passes and we return to calmer seas.