SuperStream posing potential compliance issues with court orders

Speaking to SMSF Adviser, DBA Lawyers director Daniel Butler explained that where there’s a separation, one of the spouses may be setting up their own fund, and there may be a transfer from the family fund to the departing spouse’s fund.

Regardless of whether the fund is transferring to an APRA fund or an SMSF, rollovers from an SMSF to other superannuation funds will need to be processed in accordance with the latest SuperStream standards.

X

Continue to Website

From 1 October this year, SuperStream became mandatory for all SMSFs to roll over super to and from their funds. The new standards require a trustee to roll over or transfer an amount no later than three business days after the trustee received the rollover or transfer request or if the trustee requires further information, the date the trustee receives that information.

Managing rollovers under the latest standards may be challenging, Mr Butler explained, with unplanned exits such as separating spouses where one or more members seek to invoke a rollover through the SuperStream system in the Superannuation Industry (Supervision) Regulations 1994 (Cth) and also seeks a super split of their spouse’s benefit under the Superannuation Industry (Supervision) Act 1993 (Cth) in conjunction with their property settlement under the Family Law Act 1975 (Cth).

SMSFs, in some cases, may find it difficult to comply with court orders and binding family agreements where a rollover needs to be processed under the SuperStream standards, he warned, particularly if they don’t have a suitable electronic service address (ESA) messaging provider yet that can process rollovers.

“The court orders may state that you’ve got to do it by a [certain] date, otherwise you’re in breach of the court orders. There are a number of consequences and potentially significant penalties,” he said.

“This message has not yet filtered out to many family law practitioners and they will need to be mindful of any split involving SMSFs including where an SMSF is transferring to an APRA or another SMSF a departing spouse’s or former spouse’s benefit.”

There is a risk that the split could be in contravention of the SISR SuperStream regulations, which could result in an admin $4,400 per trustee and “potentially render the fund non-complying”, he cautioned 

Mr Butler also outlined concerns that the new SuperStream standards could be used by some to put pressure on their spouse to roll over the money from the fund.

“Some people may want to use a rollover request to put the trustee of the fund under pressure to rollover the money rather than waiting on the family court to do its bit on splitting it,” he said. 

“They might want to get their money out of the fund quick smart – you get three days to roll it over [and] you may get penalised if you don’t do it within that time.”