Simple SuperStream errors avoidable

SuperStream compliance errors

SMSFs are breaching SuperStream compliance rules for simple avoidable reasons stemming from a lack of understanding of the rollover process.

Rollovers out of SMSFs that breach SuperStream compliance rules are avoidable and errors occur due to a lack of awareness by SMSF advisers, accountants and trustees regarding the process, according to an administrator.

Heffron head of SMSF technical and education services Lyn Formica said since 1 October 2021 it had been compulsory for an SMSF to use SuperStream when rolling out to another SMSF or an Australian Prudential Regulation Authority-regulated fund and many breaches of SuperStream rules were the result of simple mistakes.

“Usually it is because the trustee facilitated the rollover by sending paper rollover benefit statements and/or a cheque instead of an electronic transfer to the receiving funds, unless they had an exemption to do that,” Formica said during a Heffron accountants and auditors briefing late last week.

“There are lots of funds who just did not understand the necessity of SuperStream and so they were still using the paper option even post 1 October 2021.

“Other times we had administrators and accountants who were on top of the SuperStream concept and made a single data transfer through for the rollover to the receiving fund via SuperStream, like they were supposed to, but the trustees and their advisers didn’t get with the program and made multiple payments through to the receiving funds.”

She said these multiple payments may have occurred due to a lack of understanding of the SuperStream rules or because there was a daily transfer limit on the SMSF’s bank account.

“It might be the case we were trying to roll over $50,000. We sent the data transfer for $50,000 through to the receiving fund and the client thought: ‘I’ve got a $10,000 daily limit, I’ll just do five transfers of $10,000 over five days,’” she said.

“You are breaching the SuperStream rules to do that and you have probably already worked that out because the receiving fund couldn’t match off the transaction. It was expecting a single payment, not five payments, and it could not match it off with that single data transfer.”

She also said SMSFs were struggling to complete rollovers in the required three-day period, but this timeframe was difficult for most funds to meet due to the nature of their investment assets.

“The other way funds are not complying with SuperStream rules is taking longer than three business days to process a rollover because in those three days there is no time allowed for selling fund assets, getting up-to-date valuations of fund assets, calculating member balances and those sorts of things,” she said.

“The three business days kick in as soon as the member has told the transferring fund sufficient information, such as this is the name of the fund I want to go to, this is my member number, et cetera.

“The sufficient information is not enough to process the rollover or enough data to work out how to calculate it, so a lot of SMSFs will have failed that three-business-day rule because it’s just almost impossible to comply with.”

In the same webinar, she said SMSF trustees who could not comply with SuperStream rules when rolling money out should document those events to prevent the ATO imposing administration penalties.

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