Speaking to SMSF Adviser, Aquila Super partner Chris Levy said the SuperStream system is continuing to cause grief for many SMSF firms and their clients.
Mr Levy said he has heard of some firms still seeing 80 per cent or more of their SuperStream rollovers for clients fail while other firms are charging $2,000 to organise SuperStream rollovers for each client.
“It’s so time consuming, and you can’t give it to juniors — it has to be done at the high level. It’s a disaster,” he said.
“If you look at all the reasons [the new version of] SuperStream was established for SMSFs, it was meant to result in more efficient transfer of money and more integrity — it has failed miserably. It’s like the poster child for red tape. Everyone wants to move money around in the system but there’s now extra accounting fees that are being taken out of the system.”
Mr Levy said many auditors and other SMSF professionals are dreading dealing with SuperStream rollovers this financial year.
“It’s almost going to be a situation where its going to be automatic breaches for SuperStream because the rules are so ridiculously tight,” he warned.
“No one can meet them. In terms of grief and headaches for accountants, auditors, and trustees, it’s going to be huge.”
The biggest issue with the system at the moment, said Mr Levy is the fact there is a chain of different systems and it is difficult to identify where the error has occurred in that chain.
“The problem is not the retail or industry funds, the ATO or the accountant and the SMSF that all talk to each other, it’s that you’ve got another three databases in there,” he explained.
“The industry super funds don’t do the administration so they give it to another administration company and you get this chain, where one person talks to another who then talks to another and if something goes wrong [in the process] there’s no mechanism to identify where the problem is.
“It’s like a pipe buried in concrete and you pour water down one end and it doesn’t come out the other and you don’t know how to fix it — there’s no mechanism.
The other aspect, said Mr Levy, is that the rules are very stringent so they’re easy to fail.
“If the trustee doesn’t process the payment perfectly, it can fail,” he cautioned.
“We’ve had situations where the trustee was going to do a bank transfer of around $100,000 across to an industry super fund but the bank wouldn’t allow them to do it through online banking. You had to go into the bank as a manual type process and sign something,” he explained.
“The receiving fund said, ‘No, you’re not allowed to do it that way’. So, the bank wouldn’t let [the trustee] transfer it the way they’re supposed to and the industry fund said if they did it that way then they were going to reject it. The whole thing was a mess.”
“The whole thing is a disaster and it’s going to cause the maximum grief this year.”
Its an absolute cluster. Biggest when rolling from an SMSF to an APRA regulated fund is the lack of knowledge of what SuperStream is. I have seen issues where the receiving fund are wanting bank cheques because the operators are not aware of the requirements. Just try rolling inspecie assets out of an investment platform to a superaperannuation production within the same firm. SuperStream is not fit for SMSFs.
“You can’t make an omelette without breaking a few eggs”.
SuperStream V3 is definitely still a work in progress, but from what I’ve seen can be much better than the previous paper-based system.
[b]Rollovers OUT of an SMSF[/b]
The problem when rolling out an SMSF to an APRA fund is more about education, when triggered correctly, everything works.
I’ve done a handful of rollovers to various industry and retail super funds in the last 6 months and all have gone smooth. You need to use the SuperStream enabled software (Class/BGL/SuperMate), trigger the rollover out, get the bank details and PRN back from the APRA fund and then ensure a 1:1 payment is made from the SMSF bank account.
Many trustees don’t know their bank limits until they go to transfer a significant amount out. Here’s a tip: Get a Macquarie CMA set up for the client if they don’t already have one. Macquarie enables payment of up to $500k to be sent electronically using their Adviser Initiated Payment system (accountants can use this without needing an AFSL).
In most cases, the 3-day timeframe is not applicable where the SMSF is being wound up or a member is voluntarily transferring some or all of their super
[b]Rollovers IN to an SMSF from an APRA fund[/b]
The main issue I’ve found here is both a lack of training of staff at (mainly) industry super funds and also the ridiculously aggressive and inefficient KYC procedures industry super funds have.
Industry funds especially treat any transfer request to an SMSF as a fraudulent transfer until proven otherwise. A good handful place additional requirements on top of the normal 100-point ID check and others still are requiring original certified copies of ID to be sent via snail mail – which I believe is an intentional delay tactic to slow down transfer timelines. All ID checks should be electronic – including SMSF bank details verification.
My main tip is to get SMSF members to verify their ID with their industry/retail super fund [i]BEFORE[/i] they trigger a transfer. Many enable this via their online portals or apps and some will do it over the phone. Even if a form has to be emailed through to the fund it can be done weeks or months before the actual SuperStream transfer request. Then it should simply be a matter of providing an SMSF bank statement/letter when the transfer is triggered via SuperStream.
I also agree that dealing with issues when the APRA fund outsources the back-office processing to a third-party company is a lot more difficult.
Peter Burgess from the SMSF Association gave a very good summary of the mechanics around SuperStream at the conference in Adelaide so I am hoping more resources will come out and there will be more consistency so that rolling over to an SMSF is as easy as rolling over between different APRA funds.
The process MUST become 100% electronic otherwise what’s the point?!
Excellent advice.
I have also done several now both in and out of the system and it seems to be working great in general. The main issues I had were with some of the earlier ones where we were working out the kinks. I found when rolling into the SMSF, the details of the SMSF provided to the rollover fund must be the same as what is recorded with the ATO. Some issues that occurred were:
Provision of a different bank account than was recorded with the ATO
No bank details recorded with the ATO
ESA not updated with the ATO. This was the main one as we didn’t realise that registering the BGLSF360 ESA through BGL didn’t update the details with the ATO directly and had to be done separately
Member name not exactly the same, ie client had a middle name that wasn’t recorded in our software
Now that we have seen these issues, we know to look out for them prior to processing the rollover. When all the details match and the client uses the PRN, then no issues. We even had one where the client didn’t use the PRN but was able to contact the receiving fund and they accepted it.
I really don’t like the way the ATO is forcing mandatory electronic processes for all though. It feels very big brother and over the top unnecessary as we still have some clients that won’t use the computer. I believe they should be allowed this choice.
Also a longer adoption time should have been available especially as the software was not available prior to the mandatory start date for testing. The ATO also should have provided a free software option instead of relying on outside providers. The issue at the start was that we had no idea what was causing the problems due to the system not providing any details of the errors. We had to guess and try again. And again.
But what’s done is done and now I’m happy to use superstream.
Yes, it’s problematic. I feel that the SMSF software is part of the problem, but they won’t admit it. No-one is taking responsibility for the issue.
I haven’t had any issues, but found it is much easier to initiate the transfer on the SMSF side.
I’d never used Super Stream and knew not much about it. I rolled over from a SMSF to a retail fund and QSuper. Took me maybe 1.5 hours to research and work out what Super Stream is, find a supplier (wrkr charge $50 per annum), get super fund info from Tax Agent portal for each member and successfully roll over.
It took me six months to resolve the super stream error to do a partial rollover from my spouse’s industry fund to our smsf. The process involved numerous discussions with the industry fund and the ATO. The above article is spot on. Who invented super streaming!!
Absolutely agree it is a shambles. I imagine STP phase 2 and the November 22 cut off for Director ID will create the perfect storm of red tape rubbish for practitioners to deal with