Newsletter No. 6, June 2014

Important Deadline for SuperStream Data and Payment Standards

If you are a Self Managed Superannuation Fund (SMSF) Trustee, you may not be able to accept superannuation contributions from employers by cheque from 1 July 2014.  A new law requires certain employers to make superannuation contributions for their employees into SMSF electronically.

Employers that are affected are those that have 20 or more employees.  Employers with less than 20 employees do not need to comply with the new law until 1 July 2015.

The law does not apply if the employer is a related party to your SMSF. A related party includes the members of the SMSF as well as relatives of members, business partners and any associated companies and trusts.  Therefore, if your SMSF only receives employer superannuation contributions from related employers, then this law does not apply to you yet.

Why was this law introduced?

The purpose of this law is to increase the efficiency of the Australian superannuation system.  It is aimed at improving the quality of superannuation records, allowing the use of tax file numbers to identify members, improving rollover transactions between superannuation funds and standardising the process for making contributions.

Its aim is to provide a minimum standardised format for all superannuation funds and reduce manual processing, improve data quality, reduce errors, lower costs, cut preparation time and provide a faster receipt of contributions.  It  will mean better information about the amounts and timing of payments made for employees and will improve data matching which will reduce both lost superannuation accounts and the chance of members being given multiple accounts and thus having to pay multiple administration fees and insurance premiums.

Affected employers will be required to make superannuation contributions for their employees by submitting payments using the new Data and Payment Standards and having the payments recorded electronically using a prescribed format.  Employer contributions made by cheques or other paper formats will no longer be acceptable.

SMSFs that receive superannuation contributions from unrelated employers will need to contact the employers and provide them with:

  • an electronic service address (not an email address) for the delivery of contribution data messages
  • the SMSF’s Australian Business Number
  • the SMSF’s bank account details.

SMSFs will need to provide the above information to their unrelated employers by 31 May 2014 in order to meet the deadline of 1 July 2014.  They will also need to ensure that their SMSF’s bank account is able to receive electronic contributions and contribution messages with information about the payments in the new electronic format.

To help SMSF trustees obtain an electronic service address, the ATO has published a register of messaging solution providers on its website.

Australia Post is one of the providers that can assist SMSFs with receiving readable messages from employers and other superannuation funds.  They are currently providing a special welcome offer of $25 for 12 month registration.  The offer ends on 31 May 2014 so you will need to act on it quickly. I am not recommending Australia Post to you over any other provider, but I thought you might like to know about its introductory offer and its closing date because it might save you some money.

SMSFs that fail to comply with the new electronic standard will not be able to receive superannuation contributions from unrelated employers.  An administrative penalty of up to $3,400 may be imposed by the ATO for non-compliance. The ATO can also issue a direction to an SMSF trustee to address the contravention and take action.

Unrelated employers that don’t receive the information from SMSFs before 1 July 2014 will be required to remit their employee’s superannuation contributions to their company’s default superannuation fund instead of the employee’s SMSF.  This will mean delays for members receiving their superannuation contributions.

Disclaimer

Monica Rule worked for the ATO for 28 years and is a Self-Managed Superannuation Specialist Advisor. Monica is the author of “The Self Managed Super Handbook – Superannuation Law for Self Managed Superannuation Funds in plain English” www.monicarule.com.au. Her advice is general in nature and you should seek advice that relates to your specific circumstances before making any decisions.