The SMSF Association has cautioned the sector that only full compliance with the new SuperStream regulations will guarantee retirement savings contributions are directed to the desired superannuation fund.
And a compulsory component to achieving that outcome for an SMSF was to have an active electronic service address (ESA), SMSF Association director of technical and professional standards Graeme Colley said.
“The Australian Tax Office estimates about 5 per cent of all SMSF trustees who are employees don’t have an active ESA and they run the real risk of having their SG (superannuation guarantee) contributions going to a default super fund,” Colley said.
“Although 5 per cent seems a small percentage, when it’s considered about 300,000 funds receive employer contributions, then it means about 15,000 funds don’t have an active ESA – a sizeable number.”
He added a common problem with ESAs was that the SMSF had not been properly linked to the messaging provider.
“Remember, too, that if an SMSF trustee provides an ESA to their employer and the messaging provider is not expecting a contribution message for this SMSF, it will be rejected. The employer will receive an error message and is required by law to obtain the correct information from the SMSF,” he said.
“Where this occurs, the employer should ask their employee to complete a choice of super fund form that mandates the provision of both ESA and bank account details – information the employer needs to be able to send contributions electronically.”
In addition to the ESA, SMSF trustees need to provide employers with an Australian business number and bank account details to be SuperStream compliant.
In other news, the SMSF Association has called on the government to revise the way superannuation tax concessions are costed.
The professional body included this request in its submission to the House of Representatives Standing Committee on Tax and Revenue inquiry into the Tax Expenditures Statement (TES) process as it feels the current costing process is distorting the debate over how retirement saving should be taxed.
“We believe that the large estimates of the revenue forgone to government due to the super tax concessions leads to a simplistic observation that lower tax concessions would provide a substantial revenue gain to the government,” SMSF Association chief executive Andrea Slattery said.
“It’s our contention that more scrutiny is needed when looking at the numbers, as well as considering alternative estimates of the super tax concessions cost to government, to promote a better quality debate around this critical issue.”
The association’s submission highlighted the misuse and misinterpretation of the estimates, the lack of behavioural change included in the estimates, how the estimates do not account for the long-term benefits of the superannuation tax concessions, and the need to use a comprehensive income tax benchmark.