William Fettes, senior associate with DBA Lawyers, said in a recent online update that financial advisers and other professionals dealing with SMSFs should first be very familiar with the super streaming rules as they are a compliance requirement.
“And there’s some aspects of this with a relationship breakdown that are not entirely intuitive to everyone,” Fettes said.
“It is also important to know that you can breach the operating standards if you don’t follow the SuperStream compliance rules in accordance with regulation 6.17 of the SISR which imports the strict roll-overs rules in division 6.5 of the SISR.”
If these regulations are not adhered to properly, there could be a penalty of 20 units per trustee applied to the fund.
“That’s 20 penalty units per contravention at $330 per unit, which equates to $6,600 per trustee per contravention, and SMSF auditors, of course, have to check for this and must report a contravention where they see it,” Fettes said.
“If you have a rollover that is requested from 1 October 2021 you need to be looking at that as an auditor and applying the ACR reporting criteria. This means that if an SMSF does not comply with the rules in division 6.5 of the SISR when they make or receive a rollover or attempted rollover, the contravention meets the ACR reporting criteria.”
Fettes gave the example of a couple, Liz and Jeff, who are members and trustees of an SMSF. Following a relationship breakdown, they have reached a property settlement via minutes of consent.
The orders provide that Jeff is to receive a base amount split of $100,000 to top up his existing account balance of $350,000 before he leaves the SMSF. The trustees are arranging a transfer of $450,000 to Jeff’s nominated fund.
“The trustees are at the point where they want to arrange the transfer. Does this need to be done under SuperStream? With SuperStream, we’ve got a few exemptions, but it’s not all the exemptions you would necessarily think and so I would ask the question: Is the transfer in specie?” he said.
“If there was an asset involved, if the $450,000 comprised some property for instance, it’s outside of SuperStream. If we’re dealing with cash amounts, we have further questions to ask, and the next question is: If it is cash, is the rollover pursuant to a split as a transfer of transferrable benefits under the [Superannuation Industry (Supervision)] Regulations [7A.05 and 7A.12]? If the answer to that is yes, then it would be outside of SuperStream as well.”
As the $100,000 is a top-up split amount, it could be assumed that the amount would be transferred to the husband’s new fund outside of SuperStream, but his remaining entitlements of $350,000 are not a transfer of transferable benefits.
“They are actually a rollover of his member entitlements and though that is directly in connection with the minutes of consent, it’s not outside of SuperStream,” Fettes added.
“Even though orders may require a split amount and a rolling out of entitlements, the latter part is under SuperStream unless it’s done by in-specie transfer.”
