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  • ATO insights and actions across superannuation

    Presentation to the Australian Institute of Superannuation Trustees (AIST) 2019 AIST Chairs Forum

    14 October 2019
    Session 2 Regulators Panel
    The executive arm of government – key issues for super fund chairs
    James O’Halloran, Deputy Commissioner, Superannuation and Employer Obligations

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    Thank you for the invitation to this annual forum. It’s a pleasure to be part of the Regulators Panel session, with the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).

    As I’m sure we’re all aware and agree; superannuation is about people and their future. At the ATO we seek to keep the client experience at the forefront of how we apply and administer the law, provide advice and make decisions. We know that our approach and actions can impact on your members’ plans for their investments and their future.

    Our focus is always to approach our responsibilities in ways that build and maintain the trust and confidence of the community. In this age, with its endless demand for information, we believe one way we can continue to build trust and confidence is to be more transparent in what and how we do things and of course why we do things.

    Such an approach is particularly relevant to the journey we’ve all shared these past few years. We’ve all been motivated, perhaps even driven, by the predictable increasing client demands to provide better and timelier information to support their engagement.

    As a regulator and administrator across the tax and super system, our efforts in recent years have been to implement the ongoing range of government policy reforms leading to new policy settings and administrative arrangements.

    Of course, an immediate focus is our role in the low balance account reporting aspects of the Protecting Your Super measure and the proactive reuniting by the ATO of super accounts and balances.

    With super providers being required to identify inactive low balance accounts as at 30 June 2019 and report and pay the unclaimed super money by 31 October 2019, I can advise that the ATO systems are ready.

    We’re ready to receive the millions of accounts – to match them – and where we can identify an eligible active super account, reunite the inactive low balance account money with the fund member. We believe we’ll be able to proactively reunite the amounts throughout November. We’ll also notify fund members of the reunification once we’ve confirmed the fund has accepted the contribution.

    We’re also heavily focused on reducing the incidence of non-payment of super guarantee (SG) in the community. We now have an unprecedented level of ‘visibility’ of super information at the account and transaction level and we’re increasingly using this capability.

    We have recently completed an examination of SG contributions of some 75 million payment transactions for quarters one, two and three of 2018–19 for some 400,000 employers. We’re currently examining the payment transactions and patterns for quarter four of 2018–19. As you would know, this was only an aspiration few years ago.

    From this data, we can already see that between 90% and 92% of contribution transactions by volume were paid on time and that between 85% and 90% of the transactions by dollar value were paid on time.

    We’re now starting to actively use the data to warn employers who appear not to be paying the required SG on time, in full or at all, that they should change their behaviour.

    Indeed this week, we’ll contact 2,500 employers who we’ve identified as having paid some or all of their SG contributions late during 2018–19. We’ll also be sending due-date reminders to a further 4,000 employers.

    It should be noted this is the first direct use of the Single Touch Payroll reporting arrangements, based on what your funds report to us relating to SG payments. It’s a tangible action which demonstrates our increasing ability to effectively follow up in relative real time apparent late or non-payment of SG.

    Of course, our comprehensive SG audit work continues to be resourced. During 2018–19 we completed 27,000 SG cases. From this casework we contacted 22,000 employers and raised assessments for $805 million in outstanding SG.

    Importantly this result includes the additional SG Taskforce casework funded by the government as part of a three-year investment. The taskforce cases resulted in 9 out of 10 cases raising an assessment, with some 2,700 cases completed with assessments to the value of $127 million.

    In terms of following up SG payment from our casework, we also issued some 5,000 individual director penalty notices (DPNs) for 3,600 companies to a combined value of $283 million.

    As importantly, as a result of our compliance activities, we collected $532 million in outstanding SG and distributed it to 471,000 individuals during 2018–19.

    Of course, closely connected to the SG landscape, is the recent government announcement of the proposed SG Amnesty. It’s proceeding through parliament and we will be ready to administer any final law.

    Further ahead on our radar is the possible transfer balance cap (TBC) indexation which may occur as soon as July 2020, as required under the law (Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 and subsequent amendment to Section 960 – 285 Income Tax Assessment Act 1997).

    The law in essence establishes that the general TBC is indexed in increments of $100,000, using a statutory formula that relies on the December quarter CPI rate.

    You should note that the effect is not only a change to the total general TBC from $1.6m to $1.7m; it also means that individuals will in effect have a personal cap, somewhere between $1.6m and $1.7m.

    While it’s more likely to be triggered to start in July 2021, I want to alert you to the possibility of the change and assure you that we’re preparing to make this adjustment. There will no doubt be impacts you may want to consider for your members.

    We will advise you if indexation will apply on 1 July 2020 as soon as possible after the December quarter CPI figure is released at the end of January 2020.

    We’ve also maintained our focus on helping people engage with their super. Naturally, I appreciate the ongoing support and insights that AIST and its members have provided to the ATO.

    We don’t seek to tell people how to manage their individual super portfolio but we do want to contribute to their ability to make informed decisions that will enable them to reunite or consolidate their super.

    Between 1 July 2012 and 30 June 2018, the number of individuals with two or more super accounts (not including SMSFs) has decreased by 16%. Currently, 5.8 million individuals (representing 36% of all individuals) have two or more super accounts.

    Pleasingly, over the past five financial years (1 July 2014–30 June 2019), some 2.6 million accounts to the value of $15 billion have been consolidated by fund members using ATO online services. This includes some 540,000 accounts to the value $4.4 billion that were consolidated between 1 July 2018 and 30 June 2019.

    More broadly, we’ve also facilitated access for people to their super through a range of government super release schemes that we administer.

    The First Home Super Saver (FHSS) scheme in its first year of operation, released $39.4 million, to help 3,300 individuals purchase their first home.

    The Downsizer measure has resulted in some 4,900 individuals across every state and territory making super contributions to the value of $1.1 billion.

    The compassionate release of super scheme has assisted some 31,000 people access $456 million to deal with medical and chronic conditions and life circumstances and other conditions of release under the scheme.

    We continue to work to bring greater visibility to fund members’ information and SG contributions.

    We seek to make it easier for people to engage with their super and have greater ability to monitor the payment of their SG; in essence, for their super to be visible, valued and owned.

    While we can’t predict the next wave of reform, the ATO is future ready and of course, in line with government requirements, we will continue to work productively with you as has been our approach over many years.

    Thank you.

    See also:

    Last modified: 18 Oct 2019QC 60293