ATO provides clarity on SuperStream and family law super splits

One of the questions looked at in the guidance is whether the transfer of superannuation benefits between a member’s super account with one super fund and their spouse’s account in another super fund under a family law superannuation split will be required to be undertaken in SuperStream.

The ATO confirmed that this type of rollover is not subject to the SuperStream standards.

“These rollovers are made under part 7A of the SISR which deals with payments as a result of an arrangement whereby the member’s super interest is subject to a payment split under the Family Law Act 1975,” the ATO explains in the guidance.

“Regulation 7A.03D of the SISR provides for the non-member spouse to request a rollover or transfer of benefits.”

Transactions to which the superannuation electronic data and payment regulations and standards (SuperStream) apply, on the other hand, are prescribed under division 6.5 of part 6 of SISR.

“These regulations apply where the member makes a written request to either their transferring or receiving fund to roll all or part of their benefit within the superannuation system,” the guidance noted.

“As family law superannuation split payments fall outside division 6.5, it is not compulsory that SuperStream be used to affect the rollover.”

Previously, there had been concerns raised that complying with court orders and binding family agreements would be difficult if the rollover needed to be processed in line with the SuperStream standards.

DBA Lawyers director Dan Butler said while the ATO has confirmed that family law superannuation splits are not required to be undertaken via SuperStream, there are some complexities to be aware of here.

“When you drill down it gets a bit more complex than just assuming that a family law split is not covered by SuperStream,” Mr Butler cautioned.

“A family law split is normally what we refer to as the benefit you get from your former spouse, otherwise known as the non-member benefit. Often what happens when you’ve got a couple in the same fund is that they both have their member benefits but then there’s a split. Let’s say the husband has got more money and he might be splitting off some of his benefit to his former spouse, a non-member benefit is being paid to his former partner.

“In that event, you may have a number of rollovers because its likely that one is leaving to go to another fund. So you've got to roll over under the family law provisions being the splittable payment under part 7A, but you also have the member benefit but the member benefit is rolled over under SuperStream.”

Mr Butler said this means the timing of these two payments could be vastly different.

“If the wife wants to get out quickly, she might say 'I'm going to request a member rollover of my member benefit' and that's required under the three day rule, whereas the family law split well that could potentially take quite some time through their lawyers and through the family court splitting process of their property settlement before it gets to a stage where there's likely to be some rollover of a splittable payment, being a non-member benefit,” he explained.

The ATO has also outlined that a transfer of superannuation from an overseas superannuation fund will not be required to be undertaken in SuperStream.

“Part 6 of the SISR provides that Australian regulated superannuation funds must use SuperStream for rollovers and transfers within the superannuation system,” the ATO noted.

“As transfers to/from overseas superannuation funds are considered to occur outside the superannuation system, these transactions are not required to be undertaken in SuperStream.”

Trustees should refer to division 305 of the Income Tax Assessment Act 1997 for the treatment of superannuation benefits from foreign superannuation funds, the ATO stated.

The ATO also confirmed that in situations where an application for contribution splitting, made under division 6.7 of the SISR, results in the transfer of super benefits from the member’s super account in one super fund to their spouse’s account in another super fund, SuperStream would not apply.

“These rollovers are made under division 6.7 of the SISR which deals with payments relating to superannuation contribution splitting applications,” the Tax Office said.

“Transactions to which SuperStream apply are prescribed under division 6.5 of part 6 of SISR which applies where the member makes a written request to roll all or part of their benefit within the superannuation system.

“However, funds may choose to use SuperStream to make the payment for a contribution splitting application if they have all the mandatory information.”

The resource also provides information for SMSFs whose current SMSF messaging provider does not provide SuperStream rollover services.

The ATO explained that while there is no requirement to have an electronic service provider (ESA) that offers SuperStream services if they don’t need to undertake a rollover, they do need to have a plan in place for unexpected rollovers.

“While existing funds may not be looking to undertake a rollover in the immediate future, it is important for all trustees to have a plan in place in the event that a member requests an unexpected rollover of benefits, or the fund needs to be wound up,” it said.

“In these cases, an ESA or SMSF administration software offering SuperStream rollovers would be required.”

Mr Butler said this means that SMSFs without an ESA or an ESA that doesn’t provide SuperStream rollover services will need to have a strategy for how they will undertake a rollover in an unexpected situation.

“SMSFs [in this position] need to shop around to see what ESA services are available and whether a major software platform such as BGL, Class or SuperMate should be used and what their fund’s strategy would be if they had to move quickly,” he said. However, moving to a major software platform can take considerable time to on-board.

“That's a good thought process to go through because in an SMSF you do get members who are disgruntled [such as disputes between] family members, siblings and spouses.”