The ATO requirements state that the trustee is required to rollover or transfer an amount no later than three business days after the trustee received the rollover or transfer request or if the trustee seeks further information that is required by the approved form and has not been provided by the member—the date the trustee receives the information.
If the trustee receives a written request from the member that does not contain all the required information in the approved form, that trustee can ask for that information. They must ask the member for the information not later than five business days after receiving the rollover request.
In a recent webinar, Accurium head of education Mark Ellem said that SMSFs may face several challenges when conducting rollovers to comply with the new SuperStream requirements, especially when factoring the fund’s ability to meet the time frames and situational challenges to the fund that can arise during the rollover.
He noted that when looking at the timeline to achieve the rollover, it was important to consider the hurdles impacting the assessment of rollover request, with the need to take action as soon as possible to prepare where a rollover request is received.
Also speaking on the webinar, Garry Johnston state manager of sales at SuperConcepts said that from an administrative perspective of the new timeline to roll monies out, some funds could inadvertently struggle.
He observed that these changes test the fund’s ability to match the new requirements and touch on various aspects, such as the nuances around moving to a more regular reporting cycle.
“Like if you’re not on a regular reporting cycle, how are you possibly going to roll these monies out within three days if you get that request,” he said.
“It’s a lot like making sure ‘the left hand knows what the right hand is talking about.’ If you get that request and you’re not up to date, you’re going to have to frantically rush to process everything to get it to a point where you’re ready to go.
“It does highlight to me that challenges can emerge, and whilst rollovers into the SMSF may be easy, rollovers out is certainly where funds can run into issues.”
Mr Ellem said that the issue is going to be how up-to-date the funds’ financials are because there is a need to consider the members’ balance, the amount of the benefit, along with the details such as the tax components and the preserved components that have all got to be worked out beforehand.
“You’ve also got the other issue of cash. If it’s a cash rollover, we’re rolling over to an APRA fund, and most of them only accept cash; you’ve got to liquidate assets and consider which assets and how long does it take to liquidate them.”
This could also be possibly used as leverage by disputed members in an SMSF which could see uncertain risks play out, according to Mr Ellem.
“One member might say, ‘well, I’m having a dispute with you’, and I’ll pull the trigger and send in a request to roll over their benefit. The member has to now be rolled out within three days,” he noted.
As a result, factoring any uncertain conflict situations, if a member then happens not to be rolled out within three days, this could lead to non-compliance as it breaches an SIS operating standard.
As the timeline is an SIS operating standard, a breach means administration penalties for the SMSF at 20 penalty points, which are up to $4,400 per trustee.
“If I’m the member that’s thought ‘I’m clever’ and pulled the trigger and made the request for the rollover within three days, I’m most likely still a trustee or a director. I’ve just pulled the gun out of the holster and pulled the trigger, but it’s aimed at my foot,” Mr Ellem explained.
“This can be a pretty weird situation to be in when you have that kind of scenario, and it can be really counterintuitive and counterproductive.”
“So, I think with regard to rolling out of an SMSF facing this three business day issue, we’re going to have to make sure we can manage that process so that when the official request to roll is made you’re ready to go.”
A somewhat sensational article. A SMSF trustee is a collection of the members so it would be a very rare event that the trustee didn’t have advance warning that funds were going to be rolled out. If, as the article suggests there is animosity and one member initiates a request without consultation, the SMSF does not need to start the 3 day turnaround clock ticking. The verification needs to happen. In any event the aggrieved member will cop a fine themselves if they miss it, so the process has inbuilt checks and balances.
What wasn’t said was the benefits of this for the SMSF rolling in capital. The APRA funds won’t be able to play silly buggers and obfuscate the transfer, as has been the typical experience until now. The removal of cheque payment – a classic ‘be difficult’ action by the paying fund – is another thing to celebrate.
Where a fund has illiquid assets, there would be no benefit for a member to attempt to fast track a roll-over unless the remaining member(s) were the one that were “being difficult”.
A SMSF that has turned toxic would be the exception, rather than the rule, and I suspect the ATO would be sympathetic if appropriate representation was done early on in the dispute.
Such a lot of rubbish
I have just sent this email.
Dear Senator the Hon Jane Hume,
I am trustee and member of my own SMSF. I’ve been following with interest the increasing attempts of this government to make SMSFs unworkable under the guise of security and certainty.
I’ve just been reading about the new Superstream requirements for when funds are rolled over from or to an SMSF. Surely it can’t be correct that a member can say on Day 1 “please rollover my funds to another fund” and on Day 3 those funds must be in the receiving fund or penalties will apply for EACH trustee?
This time frame is completely unworkable for the following reasons:
1) Most of a member’s balance will be held in shares or allowed property assets in order to produce the best return for member funds. 2) While shares are very liquid assets, there is still a process for being able to sell shares and receive the funds into the SMSF accounts. Day 1: Member requests a rollover. Forms are checked. Details are checked. Day 2: IF all is okay, orders are sent to market and the appropriate share assets are sold at prevailing market price. Day 4: The share sales are settled by CHESS. Day 5 morning: The proceeds of sale are deposited into the SMSF account as cleared funds. Day 5 afternoon: Process transfer. Due to the potential size of the rollover and bank transfer limitations of an SMSF, transfer of funds may have to be done in lots. Day 6: Funds received by receiving Institution. If transfer limits come into play, then transfers could continue over the next few days. Somewhere in this schedule are 2 weekend days where nothing happens. 3) Property is very illiquid. If a member’s funds are tied up in a property, it could take months for funds to be realised through asset sales.
Minister, how can the stipulation of funds transferred in three days be done? Are you setting up SMSF Trustees to fail in their duties?
I call on the government to review the requirements for rollovers and introduce requirements that are actually do-able.
Regards,
Rob P
.
RobP Brisbane, did you read the article? If rolling from a SMSF, talk to your accountant first to make sure the rollover is ready to be processed. This will ensure the rollover can easily be processed within the 3 days.
If you have a property, don’t request the rollover until the property is sold and your accountant has reconciled the fund up to date.
The ATO cannot even get this level of turnaround in their Small Business Clearing House.
What happens when a practitioner is taking annual leave? I guess ATO have just cancelled holidays. We are not machines. Someone still has to oversee this process. Or do you just want the small operators to close up shop and leave consumers with less and less choice? FOFA . . . . . rest my case!
Audit percentage for independence certainly makes us all feel that they don’t want small operators too!
Does the ATO realise there is no solution in the market place for people preparing paper returns, or using non-online software? SuperStream provider numbers have already significantly reduced. Less choice. Too hard.
Any business wanting to make change generally strategizes how to make this happen. Normally the business would provide the mechanism to make it work, with the least disruption to their clients and perhaps with incentives. But here we simply have a monopolistic bully: Do as I say and Not as I do!