Does your SMSF receive employer contributions?
If yes, then an important regulatory change is taking place involving those contributions. The change will begin to take effect on 1 July 2014.In some cases, you must have some processes in place by 31 May 2014.
What’s happening?
- If you (or any member) work for a medium to large business – that is, those employing more than 19 people.
Your fund must be able to accept an electronic message from the employer by 1 July 2014 and will need an electronic service address to do so. The message will contain details of the payment including the employer’s name, their Tax File Number and the contribution amount.
It might also contain the employee’s residential address, TFN, telephone number, date of birth and sex.
The Tax Office has estimated that about 150,000 SMSFs will be impacted by this rule. - All other businesses
Your fund must be able to accept an electronic message from the employer by 1 July 2015. Again, the message will contain relevant details about the payment and the employee.
The Tax Office has estimated that there are about 50,000 SMSFs in this category.
What your SMSF members must give their employer
To send you employer contributions, employers need your fund’s ABN, bank account and electronic service address. This is different to a website address or an email address.
Employers with 20 or more employees need this information by 31 May 2014.
All other employers need this information by 31 May 2015.
If you don’t provide this information by these dates, then the employer might send your contributions to their default super fund.
Receiving the electronic message
For employer contributions, the information will arrive in what the ATO call the “standard format”.
To be able to receive this message, you need access to an “electronic gateway”. The job of the person running the gateway is to accept the employer’s information and then to turn it into a format that can be read by human beings.
The gateway provider must meet system certification, operational performance and information security.
How do you get an electronic service address?
There are three potential solutions:
- Your SMSF can create its own (I can’t imagine any SMSF will opt for this solution)
- Through your SMSF administrator
- You can access a SMSF messaging provider yourself.
The ATO has put a list of SMSF messaging providers on its website here [1].
Rollovers
If your fund wants to receive a rollover from an APRA regulated super fund after June 2015, then you may need to use this new electronic gateway system. (The legislation putting this requirement into place hasn’t been passed.)
Important exemption for related employers
If your employer is a related party of the super fund, then they don’t need to use an electronic gateway and your fund doesn’t have to use an electronic gateway. In simple terms, this will be any employer your fund’s members or their relatives control or are deemed by the law to control.
SuperStream
These regulatory changes are part of ongoing changes across the superannuation system called “SuperStream”.
The ATO claims that this will improve SMSF administration and make it easier for employers to satisfy their Super Guarantee and other compulsory super contribution obligations.
I don’t believe this will make your super fund any easier or cheaper to administer. Nevertheless, if you don’t put the required processes in place you and your SMSF could be fined. I think it’s best to be practical and comply with this new system simply to avoid getting into trouble.
However if you’re unhappy about these new requirements, then you might consider writing to your political representatives and telling them what you think.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report:
- Charlie Aitken: The jewel in the Crown [2]
- Ron Bewley: How to build a portfolio [3]
- Damian Crowley: My SMSF – alternatives add spice [4]
- Staff Reporter: Buy, Sell, Hold – what the brokers say [5]
- Questions of the Week: Local futures and US Treasury Bonds [6]
- Brittany Ruppert: Do you know what a Fibonacci retracement is? [7]
PLUS don’t forget to follow the Switzer Super Report on Twitter. [8]