Ensuring that an SMSF remains untouched from the compliance impact of SuperStream can be difficult when SMSF trustees have to:

1. Validate all fund and member data
2. Rely on inadequate bank transfer limits
3. Establish an electronic service address that provides for rollovers and contributions and
4. Meet all other SuperStream requirements

ATO reporting — auditor contravention reports (ACR)

Under Div 6.5 SISR, the transferring fund must ensure the payment and associated details are sent to the receiving fund within three (3) business days of obtaining all information required to process the transfer. Failure to meet the timeframe can result in a reportable breach of r6.17 SISR.

The ATO expects SMSF auditors to report contraventions for non-compliance where the rollover is requested on or after 1 October 2021, and it meets the ACR reporting criteria.

The reportable test that applies is the financial threshold test, where the value of the contravention is greater than $30,000 or 5% of total fund assets, whichever is the lesser.  

On the flip side, the receiving fund takes on minimal compliance risk. The only requirement is the trustee/s must allocate the rollover amount to the member within three (3) business days in line with r6.34D SISR.

SMSF to SMSF rollovers

In March 2022, the ATO provided an alternative solution for SMSF trustees struggling with SMSF to SMSF rollovers through SuperStream.

As a temporary measure, rollovers were allowed outside of SuperStream in the following specific situations:

1. SMSF to APRA Fund
2. SMSF to SMSF

The caveat was that it applies only to these two limited circumstances, and SMSF trustees must seek approval from the ATO by requesting a call reference number (CRN) before the transaction.

SMSF auditors are not required to report a contravention of r6.17 SISR where the trustee provides the ATO call reference number at audit time, potentially recorded via a minute or email.

SMSF to SMSF reality

Approximately 40 SMSFs have applied to the ATO for a CRN. While this is a significantly lower number than expected, only these SMSFs will be able to provide the CRN to their SMSF auditor. Perhaps most trustees were unaware they needed to seek ATO approval in these circumstances.

Additionally, it should be noted that the ATO’s transitional exemption period will likely be short-lived.

Given that an SMSF to SMSF rollover is always between related parties, many SMSF trustees may bypass SuperStream because of a lack of understanding or to minimise red tape.

It is unknown how many SMSF to SMSF transfers have been done outside of SuperStream.

Only when the accountant picks up the SMSF for year-end processing will a failure to comply with SuperStream be identified.

While the transferring SMSF will be in breach of r6.17 SISR, what happens to the receiving fund?

The receiving fund

The intent of SuperStream is to improve the timeliness of rollovers and reduce SMSF administrative burden.

The transferring fund must understand that SuperStream has two (2) separately moving parts: data verification and electronic bank transfer within the required timeframe.

While the receiving fund must be able to accept an electronic rollover, the obligation is with the transferring fund to undertake the rollover electronically.

Not complying with SuperStream breaches the payment standards, and penalties may apply.

But it is the transferring fund in the compliance firing line, not the receiving fund.

The reason is an SMSF accepting a rollover outside of SuperStream is in the member’s best interests, which SuperStream has not altered and lets the receiving fund off the compliance hook.  

The compliance impact of SuperStream

When an SMSF receives a SuperStream error message, the trustee knows that SuperStream has rejected the rollover, but they have no idea why. The error message does not identify what the error is.

It is up to the SMSF trustees to start the SuperStream process again by verifying and validating fund or member data with the ATO, making the rollover in accordance with the rollover request and the required timeframe.

With SuperStream still in its infancy, the ATO will most likely adopt an educative approach in the first year to avoid applying mass penalties to SMSFs, especially where the breach is out of their control.

SMSFs who continue to transfer funds to an SMSF outside of SuperStream will breach r6.17 SISR.

While the receiving fund will not face any compliance issues, the ATO will continue to monitor industry behaviour and reassess its compliance position where necessary.

Conclusion

The days of rolling over money from one SMSF to another and filling in the paperwork later are long gone. SuperStream has reverse-engineered this process, with all the work done upfront and the rollover as the final step.

Ensuring that SMSFs are SuperStream-ready has now become a fact of life. The main reason is that the compliance impact of SuperStream affects the transferring fund, while the receiving fund remains unscathed.

As the ongoing teething problems from SuperStream continue, there is no doubt the ATO will most likely adopt an educative approach to SMSF compliance until rollovers move towards a new status quo.

By Shelley Banton, head of education, ASF Audits