The introduction of payday superannuation payments will reduce the level of unpaid entitlements, but provision needs to be made to ensure SMSF members are not impacted if their fund is temporarily unable to receive contributions, the Institute of Financial Professionals Australia (IFPA) has stated.
In a submission to Treasury, IFPA stated problems with payday super will occur if an SMSF is late in lodging its annual return, leading to the fund being removed from the Super Fund Lookup (SFLU) register, thus blocking its ability to receive employer superannuation guarantee (SG) contributions until the lodgement is complete.
“While we understand this rule is intended to encourage timely lodgement by trustees, it can create significant issues for employees, especially where SG contributions are required to be made on payday,” the association stated.
“In such cases, the only alternative is to redirect contributions to another fund until the SMSF is reinstated on SFLU. This can cause administrative burden and confusion for both employees and employers.
“We recommend that employees be given the opportunity to challenge this rule where the circumstances are beyond their control. In our view, it should be reasonable for a fund to continue receiving SG contributions in genuine, one-off cases of late lodgement.”
It added it supported the work of the ATO in imposing penalties on trustees who routinely failed to meet their obligations and those who have not lodged a number of returns should be restricted from receiving SG contributions, but flexibility should be adopted in other cases.
“Applying the same penalty to all SMSFs, regardless of the nature or frequency of the delay, is overly harsh,” it said.
“Trustees who are late with lodgement on a one-off or minor basis should retain the ability to receive SG contributions.
“A more proportionate and flexible approach would strike a better balance between encouraging compliance and ensuring fairness for SMSF members and their employers.”
IFPA head of technical services Natasha Panagis added: “Small employers will face the biggest hurdles under the new system. A phased rollout and realistic timelines will give them a fair chance to succeed, and for employees with SMSFs, we need more flexibility – one late lodgement shouldn’t jeopardise their super.”
