Payday Super will create a new compliance burden for employers making superannuation guarantee (SG) contributions into SMSFs and they may seek indemnity arrangements for payment failures caused by a fund member, DBA Lawyers principal Dan Butler has noted.
Butler said under the new regime, which will commence on 1 July, employers will bear more responsibility contributing to an SMSF than for an Australian Prudential Regulation Authority-regulated fund as the former could change key details required for an SG payment to be cleared.
“SMSFs are more vulnerable to changing bank accounts and become non-complying with their regulatory details being withheld, so there’s more risk to an employer,” he said during a briefing late last week.
“The employer also wears additional risk if the SMSF lodges its annual return late, so details are withheld, and they may not be able to make a contribution.
“There could be a range of other reasons which could give difficulty for an employer making an effective contribution, however, the employer is subject to the choice of fund.
“If they don’t follow that choice, they can get banged up with penalties up to a maximum of $1200 per employee per payroll run, so employers will be incentivised to pay to the employee’s chosen fund.”
He said employers who have staff with SMSFs could pre-empt failures by requesting details of a stapled or default fund to which SG contributions could be paid in the event the SMSF cannot receive them.
Additionally, he suggested employers and employees could form an agreement where the latter is held responsible for certain payment failures.
“Employers who are required to contribute to an SMSF may wish to create a special provision to say: ‘I’m contributing to your SMSF, but if this goes pear-shaped and comes back to bite me, you will indemnify me,’” he said.
“That’s a legal suggestion if I was acting for the employer. If I was acting for the employee, I’d say to the employer: ‘You are wearing it because Payday Super says you are responsible.’
“It’s not a good conversation to be had and I’m not sure how many employers would really want to vary their employment agreement.
“So, employers need to focus where an employee chooses a fund which is an SMSF, which they’re entitled to do.
“As an employer, I would do more due diligence and more monitoring.”
