Issue 546, 1 September 2014
In this issue:
- Verification of rollovers for SMSFs
- Trans-Tasman portability transfers
- SuperStream: unique contribution identifier
- ASFA-ITM Data Benchmark (eighth edition)
- ‘Sort your super’ in MoneySmart Week 2014
Verification of rollovers for SMSFs
The Superannuation Laws Amendment (2014 Measures No. 1) Regulation 2014 (the Regulation) has amended regulation 6.33 of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) to amend the verification procedures that trustees are required to follow when transferring benefits to a self-managed superannuation fund (SMSF). This amendment is designed to prevent cases of illegal early release of superannuation benefits through the use of SMSFs.
Under SIS Regulation 6.33, a member of a regulated superannuation fund or approved deposit fund (the transferring fund) may receive a written request that their fund transfer or roll over the whole or part of their benefit into an SMSF (the receiving fund).
If certain information is not provided as part of the request, the trustee of the transferring fund is not required to roll over or transfer the amount.
Sub-regulation 6.33E(2) requires the trustee of the transferring fund to:
a) use an electronic service provided by the Australian Government to verify the ABN of the receiving fund and that it is a regulated superannuation fund; and
b) use an electronic service provided by the Commissioner of Taxation to validate that the member is a member of the receiving fund.
These services are known as the ‘Super Fund Lookup’ (SFL) and ‘Member Validation Service’ (‘MVS’).
If the trustee is unable to verify the details in (a) or validate the membership in (b) within five days, it must ask the member for written evidence to verify the name of the receiving fund, that the fund is a regulated superannuation fund, and that the member is a member of that fund.
Self-managed superannuation funds are used by IER schemes to extract superannuation benefits from an individual’s superannuation fund. In particular, there is a risk that the member will provide false information in response to a request from the trustee of the transferring fund.
The Regulation replaces the requirement to ask the member for written evidence of the information with a requirement to ask the Commissioner to verify and validate the information in sub-regulation 6.33E(2).
If the Commissioner of Taxation is unable to verify or validate the information, the trustee must, within ten days of being advised of that by the Commissioner, tell the member of the outcome of the Commissioner’s enquiries.
Trans-Tasman portability transfers
The Superannuation Laws Amendment (2014 Measures No. 1) Regulation 2014 (the Regulation) has amended the SIS Regulations with effect from 1 July 2013 to make it clear that the reference to a statutory declaration in sub-regulation 12A.10 paragraphs (3)(b) and (4) includes a reference to an equivalent declaration (however described) made under a law of New Zealand.
This means that requests that funds are holding and which are valid except that they are accompanied by the New Zealand equivalent to an Australian statutory declaration can now be processed.
Funds should also amend any information to members that makes specific reference to the need for an Australian-form Statutory Declaration.
SuperStream: unique contribution identifier
The Superannuation Laws Amendment (2014 Measures No. 1) Regulation 2014 (the Regulation) has amended the SIS Regulations, with immediate effect, to repeal the data standards requirement in sub-regulation 7.07E(6) that the payment reference number must be unique to the contribution or to a number of contributions made on the same day by the employer.
The change overcomes an issue with payments made using BPAY which uses the same client specific identifier as the payment reference number in all payments made for that client.
ASFA-ITM Data Benchmark (eighth edition)
The eighth edition (March 2014) of the ASFA-ITM Data Benchmark has now been released. The Benchmark, which was established in 2010, tracks industry improvements and highlights the issue of data integrity across a number of areas.
Key points from the eighth edition:
- The March 2014 Benchmark analyses over two million active members across nineteen funds, twelve funds with under 100,000 members and seven with over 100,000 members. Seventy four per cent of participating funds are self-administered funds.
- At 87.2 per cent, the ASFA-ITM Data Benchmark indicates that almost 13 per cent of member records have important core data that is missing or incorrect.
- When excluding errors in member beneficiaries, the Benchmark increases to 91.1 per cent. This measure allows the comparison of Australian funds to United Kingdom (UK) funds. Australian funds are not achieving the data quality standards set by the UK Pensions Regulator (TPR).
- Self-administered funds tend to have a higher percentage of members with no data errors (88.7 per cent) when compared to those funds administered by third-party administrators (TPAs), which were at 85.2 per cent.
- The data integrity of large funds (over 100,000 members) at 85.6 per cent is under that of small-medium funds at 92.8 per cent.
- Measurement leads to improvement. Five funds in the current ASFA-ITM Data Benchmark, which have undertaken repeat audits, have improved their combined data quality from 85.1 per cent to 88.4 per cent.
APRA has provided trustees with a framework to help them mitigate data risks and improve data quality. This is represented in CPG 235 Managing Data Risk (CPG 235).
The big question that remains for the industry is: Will trustees use CPG 235 as a guide to help improve data quality for fund members or will APRA resort to introducing minimum data quality targets as the regulator has done in the UK?
Through the Benchmark, ASFA and ITM have taken a leadership role with regard to data quality, building awareness of the need for improvement in this area for a number of years.
The ASFA-ITM Data Benchmark can be accessed here.
‘Sort your super’ in MoneySmart Week 2014
As you may be aware, MoneySmart Week 2014 begins today.
As part of the week’s activities, ASFA is urging all Australians to spend an hour sorting out their super in five easy steps. We have produced a booklet, available via this link, to help guide people through this process and encourage you to support this initiative by distributing the booklet via your networks, member databases and social media.
