December 2021

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Written by Miranda Brownlee on 8 December 2021
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Limited number of ESA providers creating difficulties for SMSFs

The small number of SMSF messaging providers currently offering rollover services is creating challenges for SMSFs in some instances as funds attempt to comply with the new SuperStream standards.

Speaking in a recent podcast, BGL head of Simple Fund 360 product Matt Crofts explained that while the latest SuperStream measures for rollovers and release authorities will result in a more standardised and streamlined system, one of the challenges being encountered by some SMSFs is the fact that many institutions are no longer SuperStream providers.

Under the new standards, SMSFs are required to get an electronic service address (ESA) from an SMSF messaging provider or SMSF intermediary in order to receive SuperStream data.

Mr Crofts explained that SMSFs need to ensure that the ESA provider can support rollovers for SMSFs.

With the newest SuperStream standards requiring an 18-month software build for BGL, this latest version of SuperStream, he said, has seen many institutions drop out as SuperStream providers.

“When SuperStream first started, which is going back around five or six years ago, there were close to almost 40 SuperStream providers and slowly they’ve realised its a tough game to be in terms of compliance and keeping up to date [with everything] and there’s very little way to charge for that,” Mr Crofts explained.

“I think around half the providers that were in there dropped out … and this latest round of SuperStream requirements were huge so it may have halved again.

“[In some cases], people are not aware of them dropping out or they’re not receiving correspondence because some of that correspondence might be going to the trustee and not the accountant who are really the ones initiating a lot of the rollovers.”

Speaking in the same podcast, Smarter SMSF chief executive Aaron Dunn said becoming a SuperStream provider was initially a more enticing business model because it was mainly dealing with inflows into an industry in the form of contributions.

“So, financial institutions were more than accommodating to be able to put these things in place because it meant they were getting cash flows into their cash accounts,” said Mr Dunn.

The landscape is now very different, however, said Mr Dunn, especially given the level of development required for the latest version of SuperStream.

“I’ve seen discussions on the notion of people going to look for an ESA and trying to find a free ESA so they can do things [but] those days are arguably over,” he said.

This leaves the major SMSF software companies such as BGL, Class and SuperMate as the only ESA messaging providers on the ATO register that can currently provide SuperStream rollover services for SMSFs, with Australia Post still working on finalising its offer.

DBA Lawyers director Daniel Butler said this poses an issue for SMSFs that are not on these software platforms, as they are unable to undertake a rollover that is compliant with SuperStream.

“The ATO’s position is that unless the SuperStream rollover process is followed, a significant administrative penalty (currently $4,400 per trustee) may be imposed, the fund may be rendered non-complying and auditors are encouraged to lodge an auditor contravention report to the ATO, which may give rise to costs and inconvenience,” explained Mr Butler.

“In short, there is currently no workaround to the SuperStream system and significant penalties and risks for those funds that seek to bypass the system.”

This is creating a “very difficult situation” for numerous SMSFs who have pressing needs to complete SMSF to SMSF rollovers, said Mr Butler.

“I am aware of several SMSFs, for instance, that need to settle on property and investment acquisitions who stand to lose considerable sums and costs for failing to settle on time. Some of these funds are now having to consider other alternatives like limited recourse borrowing arrangements to make sure they are not at risk,” he explained.

Mr Butler noted that the ATO may however look to take a practical approach and not enforce compliance until there are more ESA providers.

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Written by Miranda Brownlee on 3 December 2021
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3-day time frame for SuperStream still proving challenging

The three-day turnaround required for SMSF rollovers under the SuperStream requirements is still proving difficult, with around only 20 per cent of rollovers estimated to be currently meeting the time frame.

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.

BGL head of the Simple Fund 360 product Matt Crofts said complying with the three-business-day time frame has been a challenge for SMSF trustees and APRA-regulated funds as well, with a straw poll undertaken by BGL revealing that the majority of rollovers are currently not meeting the three-business-day turnaround.

“We just did a straw poll and we know that there are only around 20 per cent meeting that three-day turnaround at the moment. There’s been some good ones that have turned around in 48 hours which is fantastic but […] looking at the data, the vast majority, around 40 to 50 per cent, are coming through within a seven-day time frame,” said Mr Crofts in a recent SMSF Adviser Show podcast.

“I think as we get used to the system and used to the new process, I think that’ll improve.”

Mr Crofts also stressed that if the trustee doesn’t have all the information, then they only need to respond back within the three days.

“You might be missing information so as long as you’re communicating back and forth with the APRA fund, if its APRA or SMSF, if its SMSF to SMSF, then as long as you’re reaching out and making contact, that [meets] the strict definition of three days,” he explained.

He also highlighted the importance of having automated feeds with bank and wrap services in trying to meet the three-day time frame.

“You’re going to have a greater chance of being able to meet that requirement because you’ve got all the transactions there, so even if you don’t have all the information, it’s going to be a quicker turnaround [than] if you haven’t got any bank statements in front of you and you’ve got to scramble to get all that information,” he said.

He also stressed the importance of accountants and advisers communicating with each other through the process.

“If you’ve got a planner involved in the process, make them aware of what the software needs,” said Mr Crofts.

“[For example], one of the issues when you roll across to an APRA fund is that you’ve got to have the correct USI, the identifier for the APRA fund, so you may need to give them a checklist or give them access to the software.

“It’s also communicating to the trustee that if they’re going to get any queries from the APRA fund or from the accountant [that they need] to properly communicate that.”

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Written by Robyn Tongol on 1 December 2021
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Navigating SMSF rollovers under SuperStream

With the SuperStream measures now in place, SMSF professionals play an important role in helping clients manage some of the practical issues with rollovers, such as timing.

Following the introduction of the SuperStream measures on 1 October 2021, release authorities and rollovers to and from SMSFs are now required to comply with new data and payment standards. With these changes bringing new challenges to the SMSF sector, hosts Aaron Dunn and Miranda Brownlee ask Matt Crofts, head of Simple Fund 360 at BGL, to share some key insights from a software perspective on what practitioners need to be aware of.

Listen now!