Speaking at a recent conference, SuperSplitting principal solicitor Stephen Bourke explained that while the ATO has previously confirmed that the SuperStream standards do not apply to rollovers covered under part 7A of the SISR, SuperStream will still apply for the rollover of the departing member’s own superannuation benefit.
“Where there are the two entitlements, different standards apply to each – the SuperStream standards for the rollover of the departing member’s own superannuation benefit and the part 7A standards for the transfer of the transferable benefits,” Mr Bourke explained in an online session at the SMSF Association National Conference.
Mr Bourke gave an example of a four-member SMSF where there are matrimonial issues between two of the members, Debra and Dr Banks.
“Debra has agreed to a splitting order in the amount of $100,000 as part of the family law settlement. The statement of financial position upon which the amounts were used for the order was dated 30 June 2021,” explained Mr Bourke.
Debra has $200,000 in the fund, while Dr Banks has $10.
Dr Banks elects to have his entitlement transferred to an industry fund.
Mr Bourke said the first obligation on the trustee is to calculate the amount to be transferred, called the transferrable benefits.
“This is calculated from the operative time (30 June 2021) to the date of transfer (30 April 2022),” he said.
Based on the rate of interest published by the Australian Government Actuary for this financial year, this will be 5.7 per cent, which means the transferrable benefit will be $104,725.27.
In this example, Dr Banks will have two entitlements, Mr Bourke explained, including his own entitlement of $10 and his entitlement to the transferable benefits in the amount of $104,725.
“He would make a rollover request for his $10 entitlement (being the $10 plus his allocation of investment earnings on the $10). He would also make a request for the transfer of his transferable benefits in the amount of $104,725,” he stated.
“The rollover of his own entitlement must be actioned within three business days of the request under the SuperStream standards. However, the transfer of the transferable benefits is done within the part 7A standards.”
The first standard under the part 7A standards is the requirement to give a payment split notice within 28 days from the service of the order on the trustee.
“The next one is the request to transfer the transferable benefits, and that’s 28 days from the payment split notice. Dr Banks, in this particular case, would be the person who’d be making this request,” he noted.
“The trustees then has to action that request, and the trustees then have a further 30 days to [do that]. If no request is received, then the trustees give notice to Dr Banks, in this case, requesting the nomination of a complying super fund.”
If there is no response in a further 28 days, then the benefits may be transferred to an eligible rollover fund.
“So, finally you can go to an eligible rollover fund as the final port of call to rid the super fund of Dr Banks, provided he has his request for a rollover of his $10 benefit, which is not part of the family law settlement. That’s his own benefit that has to be dealt with in accordance with the rules of the fund and the SIS regulations,” he explained.
The $10 rollover will therefore need to be actioned within the three business day time frame prescribed under the SuperStream rollover standards.
“While that’s easy enough to do in this particular case, it can cause problems for SMSFs trying to conform with that time frame,” he said.
“So you can see that there are quite different time frames that apply. The time standards under part 7A are much more generous [than] under SuperStream.
“Where you’ve got a rollover plus a transferable benefit, it would be much easier if those two things went together, but the ATO has said ‘no, SuperStream applies to anything that’s governed by that which would be that $10 rollover. Part 7A applies to the family law transferable benefit, which is quite a different time standard’.”
