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SuperStream — a not-so-happy birthday

By Chris Levy, Aquila Super
04 November 2022 — 6 minute read

Whilst SuperStream has been a part of the broader superannuation landscape for several years, its presence in the SMSF space has just passed the 12-month mark. Hitting this milestone represents an opportune time to review its impact, briefly highlight its many problems and discuss possible solutions to mitigate or alleviate the headaches that many of us are experiencing.

As many industry commentators including, myself predicted, the impact of SuperStream has been and continues to be an unmitigated disaster.  

Rather than the bright and bubbly one-year-old that its ATO parents were no doubt hoping for, this enfant terrible has instead shown itself to be the type of toddler that regularly draws on the walls, attacks the cat and urinates all over the floor. Its problems can broadly fall into two categories:

  • Failures associated with the many precise rules that must be followed when SuperStream is used, sometimes leading to delays in money transfers and in many cases resulting in one or more breaches of the SIS Act.
  • Random and mysterious banking or superfund rules previously not known about and/or not disclosed by the APRA fund or bank involved in the rollover. Issues arising from these tend to create significant delays or can sometimes even torpedo the rollover process.

SuperStream and the Audit Process

The list of SuperStream rules required to roll money into and out of SMSFs is contained in Division 6.5 of the SIS Regulations and is both exhaustive and highly prescriptive. It is beyond the scope of this article to cover them in detail and there exist many good summaries available elsewhere, including in this publication.  

What is perhaps less appreciated is the approach that the Regulator has placed upon SMSF auditors when reviewing a rollover that was done through SuperStream. That is, the duty placed upon auditors with respect to SuperStream is not about being alert to potential non-compliance, but instead requiring positive assurance that the rules involved in a roll-over have actually been followed. As one of our accountant clients pointed out, we’ve stopped being watchdogs and instead, morphing into bloodhounds - a reversal of one of the ancient tenets of our auditing profession. The distinction may be subtle but places a heavy responsibility on trustees and their accountants when grinding their way through a roll-over to ensure that various documents and forms are prepared and retained in a safe spot for the year’s audit.  

This is best illustrated by a simple example we’ve been encountering involving a seemingly innocuous SuperStream provision. One of the many rules states that a member seeking to roll their monies into a SMSF must use the SuperStream system to initiate the roll-over process. Auditors are in turn required to ensure that this has been complied with and to have evidence to support this. If the member initiated the request using the SMSF’s software platform (e.g. Class or BGL) the documentation proving this can typically be obtained with relative ease.   

However, if the member instead initiated the rollover using the transferring fund’s processes (typically a retail or industry fund) or MyGov it’s often a different story. In many instances, the member did not retain the proof of the initiation request at the time they actioned it as they simply weren’t aware of the compliance requirement. By the time the audit rolls around it is often too late to obtain any proof of the initial request. Unfortunately, the absence of documentation has resulted in an effective breach of the SIS pension regulations. In turn, this usually leads to a Part B qualification of the audit opinion and/or the lodging of a contravention report depending on the size of the rollover. This is but one example of many challenges that auditors have started to grapple with as the 2022 audits roll in.  

The only real viable solution I have seen employed by accountants is to ensure that any trustee or staff members about to embark on their own SuperStream rollover adventure thoroughly reacquaint themselves with the rules. Fortunately, the ATO has prepared an excellent summary on their website (SuperStream SMSF rollovers and auditor reporting obligations – QC70324). Even better, many accountants are increasingly employing detailed SuperStream checklists for each and every roll-over transaction to assist walk through the process, ensure nothing slips through the cracks, and help ensure that appropriate documentation is retained.

At the same time, it is hoped that when it comes to these SuperStream breaches, the ATO adopts an educational approach for at least this year’s audits rather than one based on enforcement involving the heavy use of penalties.

Random Acts of Frustration

The other batch of problems encountered by accountants and trustees over the last 12 months arose not because of the SIS regulations but because of the existence of obscure and bizarre internal rules adopted by banks and to a lesser extent APRA funds. By their very nature, they are inconsistent and without any uniformity which in turn prevents providing an exhaustive list.  

In order to hopefully illustrate the sort of issues to watch out for I have listed my personal favourites below:

  • One of the primary causes for SuperStream roll-overs to fail is where the dollar amount of the roll-over does not exactly match the deposit that hits the receiving fund’s bank account. Not only should it be impressed on trustees to ensure that it must be exactly the same, but the trustees must also ensure that their SMSF’s bank daily transfer limit is high enough to cover the rollover of large sums of money. I have heard of large rollovers having to be carved up into multiple smaller rollovers to meet a bank’s maximum daily transfer limit. I have also heard some trustees specifically creating new bank accounts with another bank (Macquarie seems to be a favourite) due to the higher transfer limits allowed.
  • We have heard of stories of trustees being provided with very detailed banking instructions by their accountants for when they do their super stream rollover banking. However, upon trying to do this at the bank problems typically arise that get in the way. In the pressure of the moment and at the suggestion of bank staff, trustees typically then make a decision to proceed in a different fashion than instructed by their accountant. This almost always results in a super stream failure.
  • Some banks (e.g. ANZ) cannot seemingly process some super stream rollovers as the narration fields they use internally does not currently allow enough digits.
  • We have heard of inconsistencies with the available banking pathways to transfer large super stream rollovers. For example, Commonwealth Bank will allow trustees to use their international money transfer mechanism to process large super stream rollovers, yet most other banks do not.
  • Banks are refusing to process some payments as the destination account as listed within the super stream system does not exist or is different. This arises because the super stream bank database is not up to date.  Trustees should check this before attempting any rollover. 
  • There is confusion as to what an electronic funds transfer actually is for the purpose of Super Stream rollovers. Some APRA funds (e.g. Colonial) refuse to accept transfers of funds made electronically, where the trustee has gone into the bank branch and organised the bank manager to make the transfer. An internal memo from Colonial reveals that they deem them to not be an “Electronic Fund Transfer”. To support their position, they point to an ATO super stream ruling released in August 2016 (5 years before super stream for SMSF rollovers were implemented) that discussed acceptable payment methods relating to Super Stream for contributions.  
  • We have also heard of divorce situations where the super stream has failed, and the receiving fund has just manually allocated the money to the member account. This effectively leaves the remaining spouse carrying the compliance headache involving audit breaches as the ex-spouse usually has little interest in redoing the rollover process correctly.
  • The receiving APRA fund’s system erroneously flags the rollover as not meeting the Super Stream standards. This has left the member chasing the APRA fund for months to find out why. The answer that eventually came through was – “Oops sorry, our fault. Your money has been allocated to your account. We, however, will not respond via Super Stream to confirm this.”  

In order to minimise such headaches, some firms are having trustees confirm various details (e.g. transfer limits, member names, etc…) with the other Fund and the bank to head off any issues early but even such proactive steps are no guarantee of an error not occurring.

In time, it is expected that many of these buys and quirks will be ironed out, and the laws relaxed slightly to allow a degree of flexibility. Hopefully, SuperStream’s second birthday will see it transformed into a far more well-behaved toddler.

Aquila Super will be running a webinar on 24 November providing tips on how to make SuperStream less stressful. 

By Chris Levy, 

SuperStream — a not-so-happy birthday
chris levy  smsf
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