What to do if your fund receives employer contributions.
If your SMSF receives employer contributions then you need to know about an important regulatory change that is about to take place involving those contributions.
The SuperStream changes for SMSFs have taken effect from 1 July 2014.
If you (or any member of the fund) 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 30 June 2015 and will need an electronic service address to do so. The message will contain details of the payment, including the employer’s name, Tax File Number (TFN) and the contribution amount.
It might also contain the employee’s residential address, TFN, telephone number, date of birth and gender. The Australian Taxation Office (ATO) has estimated that about 150,000 SMSFs will be impacted by this rule.
If you work for a smaller business, your fund must be able to accept an electronic message from the employer by 30 June 2016. Again, the message will contain relevant details about the payment and the employee. The ATO has estimated that there are about 50,000 SMSFs in this category.
What your employer needs
To send your 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.
For large or medium-sized employers (20 or more employees), implementation of SuperStream must be completed by 30 June 2015. Talk to your employer about when they will start to send contributions using SuperStream.
If you don’t provide this information 60 days before the time your employer implements SuperStream then the employer might send your contributions to their default super fund.
Get the right format
For employer contributions, the information will arrive in what the ATO calls 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 their website.
Exemption for related employers
If your employer is a related party of the super fund, then it doesn’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.
These regulatory changes are part of ongoing changes across the superannuation system called “SuperStream”.
The ATO claims 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.
Tony Negline has worked in financial services for more than 25 years and has been heavily involved in self-managed super funds since mid-1994. He writes about SMSF matters for a wide range of audiences including accountants, auditors, financial advisers and SMSF trustees.