On Tuesday 17 July 2018, the Government released exposure draft regulations, proposing to extend SuperStream to include rollovers to and from self-managed superannuation funds (SMSFs).
The Minister previously announced this measure, on 27 April 2018, at the same time as announcing that SMSFs will be allowed to have up to 6 members (instead of only 4). She announced these two measures under the heading of “Greater flexibility for self-managed super funds”, saying:
- it would “make it easier to roll existing superannuation funds into a self-managed fund.”
- She said it will “allow[ ] SMSF members to initiate [and compel receipt of] rollovers electronically between an APRA fund and their SMSF.”
- She also said: “This will reduce compliance costs, expedite the rollover process and further improve the integrity of the super system.”
The exposure draft is currently styled: Treasury Laws Amendment (2018 Measures No. #) Regulations 2018. There are two main parts to the implementation of this measure.
- The first is to get Part 3B of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regs) to apply to SMSFs. This is the Part (r3B.03) required ‘prescribed eligible superannuation entities’ to give key electronic payment and identifier details to the Commissioner of Taxation (for contributions to the fund and rollovers to or from the fund). SMSFs were excluded from this ‘prescribed’ definition (under r3B.02). The exposure draft Regulation proposes amending r3B.02 so that it prescribes “all eligible superannuation entities” (proposed Reg, Sch 1, item 2).
- The second is to get Part 6, Division 6.5 of the SIS Regs to apply to SMSFs. Part 6 sets out ‘payment standards’ for funds, generally, and Division 6.5 makes compulsory: rollovers or transfer of superannuation benefits, broadly, if a member requests it. Currently SIS Reg 6.30 excludes SMSFs, but the proposed regulation remove that SMSF exclusion (proposed Reg, Sch 2, item 2).
Up to now, SMSF’s had been carved out of these requirements, unless they were going to receive contributions from arm’s length employers. [I must confess, I can’t find the relevant statutory basis for this.]
Date of Effect
The amendments made by Schedule 1 to the Regulations commence on or after 30 November 2019. Self managed superannuation funds will not be required to do anything in relation to SuperStream before that date.
The amendments made by Schedule 2 to the Regulations commence from the day after registration and apply to transfers and rollovers that are requested on or after 30 November 2019.
The amendments made by Schedule 3 to the Regulations provide the application and transitions rules for Schedules 1 and 2.
SUBMISSIONS are due by 3 August 2018.
Background to SuperStream
SuperStream was introduced in 2012, as a result of an earlier 2010 recommendation from he Cooper Review into the Superannuation System, which found that contributions were processed both at employer and fund level manually, adding to cost and were often done unreliably, even losing contributions (with employers having the added difficulty of having to accomodate its workforce have a ‘choice of fund’ – under SGC changes).
SuperStream was designed to be a comprehensive package of legislative and administrative reforms. It was planned to provide the superannuation industry with ‘fit for purpose’ data standards to modernise the processing of fund member transactions, and also improve the member, employer and fund experience and their confidence in the superannuation system. With this industry engagement a digital standard was designed to improve efficiency, provide an easier system for employers to use, reduce lost accounts and provide a timelier flow of money to members’ accounts.
The key benefits of SuperStream are categorised into three core outcomes: lower cost; ease of operation in the superannuation system; and increased retirement savings.
Superstream was introduced 2012, by introducing of Part 3B into of the Superannuation Industry (Supervision) Act 1993 (SIS Act), s34K(1) of which authorised the Executive to make ‘regulations’, that compelled trustees of ‘eligible superannuation entities’ and employers (in relation to their dealings with such entities) “in relation to superannuation data and payment matters” (viz: contributions and rollovers). Section 34K(3) permitted the Commissioner of Taxation to determine, by legislative instrument, standards relating to those same “superannuation data and payment matters”. Section 34Z also permitted the Executive to make regulations about the information ‘prescribed eligible superannuation funds’ had to give the Commissioner of Taxation and the manner in which it was to be given.
Exercising that right, the Executive then made regulations, by inserting a matching Part 3B of the SIS Regs, Reg 3B.03(1) of which, obliged ‘eligible superannuation entities’ to give the Commissioner of Taxation: (i) “at least one unique superannuation identifier for the entity”; (ii) “one set of bank details that is sufficient to enable an electronic payment to be made”; and (iii) “one other kind of digital address approved by the Commissioner for the receipt of electronic communications”. The ‘eligible’ fund has to do this at least 10 business days before it receives its first contribution or rollover.
And, exercising the s34Z power, the Executive made regulations, inserting SIS Regs 6.33A, B, etc and 6.34A, B etc (in Div 6.5 into Part 6 of SISR) obliging rollovers to not only be made, but also done electronically.
Comprehension questions (answers available)
- Has Treasury released an exposure draft of changes to the SIS Regs, to make SMSFs subject to the electronic ‘SuperStream’ regime?
- Will this make life easier for SMSFs which have had only member and related party employer contributions?
- Will this be better for SMSF members (ignoring the effect on the Fund)?
- Will these changes start at the beginning of the next financial year, that is: 1 July 2019?