Sean Johnston, client relationship manager for Heffron, said despite SuperStream now being in force for two years, clients could face penalties when conducting rollovers unless they are educated.
“If there is one takeaway from everything we’ve learned since the implementation of SuperStream rollovers, it’s that education really is the key here – the more work you can do ‘up-front’ the more likelihood you have of nipping a problem in the bud,” Mr Johnston said.
He said as a rollover is something many clients will do a number of times in the life of their SMSF, it is important to get the fundamentals of this process correct from the beginning.
He said many clients are unaware that they only now only have three days to action a rollover once the trustee has received the request and all the information required has been provided.
“It’s one of the ‘new’ rules,” he said.
“So it’s important to make your clients aware this timeframe exists, start communicating with them early in the process and start educating them to change their language when requesting rollovers.”
To make sure the process is completed properly, Mr Johnston said members should request that the fund is prepared for rollover before they formally request the rollover.
“Preparing for rollovers out entails doing everything that needs to be done to get the fund right up to date to facilitate the rollover such as selling assets, bringing the accounting up to date, interim tax calculations, changing bank transfer limits and anything else that needs to be done,” he said.
“If the fund is prepared for the rollover out before the rollover request is made, the time pressure the three-day window imposes is significantly decreased.”
Most problems are now occurring in actioning rollovers as it is the most mechanically intricate part of the rollover out process.
Mr Johnston said to try to mitigate these problems, he suggests writing an email for clients that they can refer back to and use as a checklist.
This checklist should mention that the payment amount must exactly match the rollover amount on the SuperStream notice considering any bank transfer limits, which may mean they need multiple rollovers or to increase bank limits.
It should also be noted that payment(s) must be made on the same day SuperStream notices are sent between funds and the payment(s) must be to the bank account on the SuperStream notice.
Payment(s) must also be made using the payment reference number (PRN) on the SuperStream notice as the reference number to the transaction and be made via electronic transfer.
“All of these areas must be ‘mechanically’ correct for the rollover to be able to be completed at ‘both ends’ of the transaction,” Mr Johnston said.
“If these items aren’t correct the rollover may not outright fail, but it will need some manual intervention from both you and your client to correct.”
If something does go wrong in the rollover process there is no standard way of fixing it and Mr Johnston said the only “sure fire” way of ensuring that it is corrected it to call the recipient fund and ask them what they require.
“We’ve come across a few different solutions to the problem,” he said.
“One is to send SuperStream notices through to match any earlier cash amounts paid without matching data and the recipient fund will fix it in the background.
“You can also send a copy of the original SuperStream notice and the receiving fund will fix it in the background. The receiving fund will refund the cash to the sending fund, and you’ll need to redo everything from scratch.
“Finally, send through a paper rollover statement to the receiving fund and the recipient fund will fix it in the background.”
However, he warned never to assume that the problem has been resolved, as if it hasn’t it could lead to a rollover being counted as a contribution for the member.
“While it’s certainly a stressful situation when rollovers go wrong, a lot of the stress can be alleviated by having a plan in place and the fastest way to determine what the plan is, is to ask the recipient fund what they need you to do,” he said.
Extending SuperStream messaging to SMSFs was one thing, but for roll-outs, linking that to the payment arrangements was ill-conceived.
The limitations of internet banking such as daily transfer limits of $5-$10k per day were not even entertained by the ATO SuperStream implementation team. It seems all the focus was on rollovers out of APRA funds to SMSFs, not the other way. Banks were not invited in any consultation process and were also caught flat footed by SMSFs trying to implement SuperStream payment transactions. Banks are notoriously hard to contact by phone, particularly for complex matters, forcing many trustees to visit banks to try and implement roll-outs. The ATO’s only unhelpful comment about daily transfer limits was “change banks”!
Winding up funds can be impossible when trying to make a final benefit payment with a SuperStream Payment Reference Number to close an account. When final interest is added, it is impossible to match to a SuperStream message already sent.
More importantly, accountant’s and their staff have been thrust into this responsibility of giving payment instructions to SMSF trustees, sometimes for millions of dollars that are heavily reliant on correct numbers being quoted by the accountant or their staff. You can be sure that if the payment goes astray, the accountant is in the firing line, but with no way or authority to track such a payment. Nor is this covered by most PI policies.
There was no need for SuperStream for SMSFs to be linked to a payment system. Once a message is approved, there would have been no issue with SMSFs paying roll outs by bank cheque as was the process before SuperStream.
Again accountants are forced to carry the can for the shortsightedness of bureaucrats.
Agree – Accountants have to deal with the fall out. Banks have no idea what is required. Had 2 banks insist on giving the trustee a bank cheque to send to the new super fund. Had another bank insist the client can do the transfer themselves where the amount to transfer was $800k!! Banks also cannot accrue and apply interest to date until account is closed so if the super stream goes wrong there is no bank account open to return the funds to. Winding up a SMSF, rolling out the funds and dealing with banks that do not understand the requirements for SMSFs is ridiculous. Once again, no thought went into the process as to the practicalities of it. And who is left to deal with the stress of it? Not the trustees, its the bloody accountant.