Thankfully the status “regulation details removed” on Super Fund Lookup does not mean a super fund has been made non-complying. Instead, it indicates the ATO has removed the super fund’s regulation details as lodgement of the fund’s annual return is more than two weeks overdue. For example, a super fund that has yet to lodge its 2023 annual return and has not received an extension is now likely to have had its Super Fund Lookup status changed from “complying” to “regulation details removed”.
Having regulation details removed from Super Fund Lookup can be quite problematic.
Firstly, it prevents the fund trustee from receiving rollovers and employer contributions from arm’s length employers. These types of transactions need to be made using SuperStream and whilst the fund’s status remains as “regulation details removed”, the SMSF cannot interact via SuperStream.
This may cause a super fund to have liquidity issues if it has regular outgoings such as loan repayments, insurance premiums or administration fees and is relying on regular super contributions to provide cashflow.
Related party employers who are exempt from using SuperStream may still decide to make contributions to the super fund despite the fund’s Super Fund Lookup status. However, they may risk the contribution being non-deductible and not counting towards their super guarantee obligations if the fund is subsequently issued with a notice of non-compliance for that financial year.
Why would a fund be issued with a notice of non-compliance?
That outcome is usually reserved for serious compliance issues. For example, funds with a long history of non-compliance, trustees who fail to respond to ATO demands (trustee behaviour is a significant factor) or particularly serious breaches such as taking money out of the fund before being eligible to do so.
If the fund’s outstanding returns are about to be lodged and the fund has no other compliance issues, then there should be little risk of adverse outcomes for a related employer by continuing to make contributions to the fund. However, it’s likely these contributions will need to be made by EFT or cheque as payroll systems and clearing houses often have inbuilt mechanisms to block contributions going to funds without a status of “complying”.
Personal member contributions are not required to be made via SuperStream and if a member of the fund is permitted to make a super contribution, this may help to provide short-term liquidity. As with employer contributions, a condition of a member contribution being deductible is that the contribution is made to a fund which is a complying fund for that year.
Issues may also arise if the super fund is making new investments and a condition of the application being accepted is for the super fund to have a “complying” status on Super Fund Lookup. Having regulation details removed may therefore prevent a trustee from entering into transactions such as opening a new bank account or entering into a limited recourse borrowing arrangement.
Once the super fund has lodged its overdue annual returns, the fund’s regulation details will be updated within a few weeks (either at the start of the month, or around the middle of the month). But until then, the trustee has quite a few good reasons to ask their tax agent to request an extension of time to lodge or arrange for the outstanding returns to be lodged without delay.
The concept is fine, but I have a second case where it was removed by an ATO error. It is extremely difficult and time consuming to try and get it resolved.