The introduction of SuperStream measures from 1 October 2021 for the rollovers to and from SMSFs aims to create a faster and more efficient was to process rollovers with fewer errors. It brings the SMSF sector into line with the rest of the super industry where SuperStream is used for digital transactions. Whilst many SMSFs already use SuperStream for employer contributions, its expansion into rollovers and release authorities means that it will play a much wider role in the sector.
In this post, I am going to focus on the area of rollovers – transfers to and from the SMSF that will need to comply with the data and payment standard.
Rollover into a SMSF
Where an individual requests for a rollover of their super benefits into an SMSF under the portability rules, they can do so either by an online request or using a paper form.
If the member is requesting to transfer the whole balance of a super account from an APRA regulated fund to an SMSF, this can be completed via the submission of an Electronic Portability Form (EFP) through the ATO’s Online Services – this will require the individual to have their MyGov account linked to the ATO. As part of this process, the ATO will verify the member’s identity and their membership details before sending the EPF to the transferring fund for processing.
Where the member is unable to request the transfer online (or chooses not to), they can use the paper form to request the transfer of the whole balance of the account.
Should a member wish to request a partial rollover of their super account, they can activate this from within the SMSF or alternatively make contact with the fund that holds the account to find out what information is required to activate this request.
The process for rollover
Electronic Portability Form
Once the member has made this request using a EFP, the ATO will send the form to the transferring APRA fund to electronically via SuperStream. The ATO before sending the EPF will:
- authenticate the identity information of the member against the information the ATO holds;
- confirm the individual is a member of both the transferring and receiving funds;
- ensure that the rollover or transfer is not being made to funds suspected of illegal early release (IER); and
- ensure that the transferring and receiving funds are regulated funds and not wound up.
With super benefits only eligible to be rolled over to a complying SMSF that is regulated, it is up to the transferring fund to verify the SMSF and member details using the SMSF Verification Service (SVS).
The SVS will verify the following:
- SMSF status (Complying or Regulated);
- the TFN of the individual is associated with the SMSF;
- no verified date of death exists for the individual/SMSF member associated with the SMSF;
- SMSF bank details in the request match those held by the ATO; and
- electronic service address (ESA) details in the request match those held by the ATO.
It is important to remember that as part of the rollover process, APRA-regulated funds will not rely solely on the SVS to meet their ‘know your client’ obligations. This may result in a request for further information from the member to assist in confirming the member’s identity, confirming the destination of the payment, and ensuring that all mandatory information has been provided on the paper form or EPF.
The SVS will also trigger an ATO alert to the member to notify them about the rollover – no action is needed from this alert unless it is believed to be an unauthorized request to roll over.
The transferring fund must request any further information required within five business days of receiving the request, and then must complete the rollover within three business days of receiving that information (see SISR 6.34A). Time frames also exist for members to supply requested missing information – if these timeframes aren’t met, it can result in the trustee of the transferring fund canceling the application of the rollover request.
Increased role of service providers
With the key SMSF software providers now having updated their systems to utilize electronic messaging for rollover requests to and from an SMSF from 1 October 2021, there would appear to be a greater role of the accountant/administrator in activating and managing this rollover process via SuperStream. This will include using the messaging service to confirm receipt of the rollover funds into the SMSF bank account.
It is important to remember for those who are not appropriately licensed that any requests being undertaken do not ‘overstep’ the mark of having provided financial product advice in respect to the activation of a rollover request. Ensuring unlicensed practitioners have appropriate instructions and/or other evidence to support the request will be vital.
Rollovers from the SMSF
There will be circumstances where SMSF trustees will need to instigate a rollover to another super fund. Similarly, this will require the fund to provide a statement to the receiving fund within 3 business days via SuperStream. Only in circumstances where the SuperStream standard does not apply will the trustees send a rollover benefits statement (RBS) or death benefit rollover statement (DBRS) to the receiving fund within 7 days of paying the rollover (e.g. non-complying fund paying benefits). This will also require the fund to provide an RBS or DBRS statement to the member within 30 days.
There are a number of steps that must be followed to rollover a member’s benefits (partial or full) from within an SMSF – this includes:
- using the SMSFmemberTICK system to validate the member’s TFN (SISR 6.33D requires the mandatory use of this service)
- using the SMSF Verification Service to verify fund and member details when rolling to another SMSF
- using the Fund Validation Service to verify the fund details when rolling to an APRA regulated fund
- make the rollover via SuperStream no later than 3 business days after receiving all the information required to process the request
Additional steps are required when the rollover is a death benefit rollover and the recipient is a dependant child beneficiary.
It should be also noted that in-specie rollovers are not subject to the SuperStream system.
Timing is everything
The timeframe for trustees to comply with any rollover request from an SMSF is going to present a challenge, in particular where firms undertake a fund’s financial reporting on an annual basis, rather than via a regular reporting framework. In these situations, it is going to require the trustees to swiftly get the accounts up-to-date to action such a request.
In some instances, such requests may also be restricted due to access to reports, such as tax statements. All this leads to the importance of ‘planning ahead to ensure that such requests can be prepared in a timely manner.
Whilst the ATO will take an ‘educative’ approach to trustee compliance with the new SuperStream rules, it will be incumbent upon fund auditors as part of the compliance part of the annual audit to ensure that trustees have complied with the requirements in Division 6.5 of Part 6 of the SIS Regulations.
SISR 6.34 sets out the timeframe to action requests for rollovers, including where additional information is required. Failure to comply will mean an auditor contravention, with a breach of SISR 6.17 – that is, the fund has not complied with the Division 6.5 requirements). Where an operating standard breach exists, section 34(1) of the SISA carries a penalty of 20 penalty units or $4,440.
Whilst we continue to see a shift by the Regulator towards a more digital approach for SMSFs, it is not going to be without its teething problems. However, the use of technology for various service providers is without question going to play a vital role in the broader implementation of these measures across the SMSF community. Visit our SMSF Investment Strategy.