The ATO has highlighted that SMSFs cannot take a passive stance in regards to preparing for the introduction of Payday Super and a lack of action could result in employer contributions being redirected or unpaid.
ATO SMSF risk and intelligence director Paul Delahunty said on-time lodgement, correct fund details and reporting issues to the regulator were key areas trustees should continue to work on before and after the new system starts on 1 July.
“Trustees must continue to meet all regulatory and lodgement obligations to ensure their SMSF remains complying, particularly as contribution timing becomes tighter,” Delahunty said during a recent online update for super and tax practitioners.
“SMSFs that have compliance concerns or get behind on their lodgement obligations risk the fund having its status changed from ‘complying’ on Super Fund Lookup, which will mean potential challenges for employers in making contributions into the SMSF.”
He added correct details for an SMSF’s electronic service address (ESA) would also be critical in ensuring contributions could be made and not rejected or redirected.
“From 1 July if the SMSF is receiving contributions through SuperStream and the trustees do not have an active ESA, employers will receive an error message and that will stop them from making further contributions to the fund,” he pointed out.
“This may unintentionally expose the employer to a super guarantee (SG) charge if the contribution isn’t made within the required timeframe.
“To avoid the SG charge this may mean the employer will open a new account in their default fund and pay the SG contributions to that fund as their software or clearing house will not let them pay the amount to the SMSF until the ESA is active.
“One consequence of this is the employee will then need to then roll over those amounts should they wish to have those contributions in their SMSF.”
He also noted while Payday Super would enable the ATO to track when employers were not meeting their SG obligations, this would not apply as strictly with SMSFs, requiring them to inform the regulator of any problems.
“It’s little bit harder when it comes to SMSFs because the ATO doesn’t get real-time information about contributions going into these funds. Instead, we only see contribution details when the SMSF annual return is lodged, so that’s why lodging on time is so important,” he stated.
“As they do now, SMSF members will still need to keep an eye on when the contributions are coming in and get in touch with the ATO if they’re worried their employer isn’t paying the right amount of super.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason