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  • Superannuation regulatory update in a changing landscape

    Panel session for ASFA (Association of Super Funds of Australia) Policy Roadshow

    8 August to 5 September

    Deputy Commissioner James O’Halloran

    (Melbourne, 15 August; Sydney, 23 August; Brisbane, 28 August; Perth 5 September)

    Assistant Commissioner Graham Whyte

    (Canberra, 8 August; Hobart, 13 August; Adelaide, 4 September)

    Check against delivery

    Thank you for the opportunity to join you today as a member of this regulators panel with the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC) and the Australian Financial Complaints Authority (AFCA).

    Through our respective roles, we recognise the importance of your part in making the superannuation system operate.

    On behalf of the ATO, I’d like to acknowledge the work done by super funds generally and many of you individually to implement major reporting changes arising from the 2016, 2017 and now 2018 budget changes. In my view it has been a very collaborative effort between industry and the ATO; one built on early engagement and co-design while respecting each other’s role in making super ‘real’ for people.

    It could be said we have a complementary or common goal in seeking to find ways to improve and maximise peoples’ engagement with their super. Like you, we appreciate that super is really about people and their future. We believe that members can’t and won’t fully engage unless their super is easily manageable and visible.

    A key to the ATO achieving our ’vision’ for super is ensuring transparency for members of their super accounts and related information. When super is visible and supported by necessary explanations, guidance, and understanding, it will be valued and therefore actively ‘owned’ by individuals. We believe this integrated approach will help give people a level of trust and confidence in the super system and recognise our collective efforts to operate and administer super, often on their behalf.

    As a regulator, we know from experience that when people have confidence in the tax and super system, they will be more likely to participate, meet their obligations, and make informed decisions.

    We work with you in an integrated ecosystem with strong interdependencies across each other’s processes and information exchanges. Therefore, it’s only by working together that we can make the system operate as intended.

    The move from annual fund reporting (through lodging, 32 million, member contribution statements with the ATO) to event-based reporting is now underway.

    Event-based reporting through the Member Account Attribution Service (MAAS) and Member Account Transaction Service (MATS) is now becoming a reality, with MAAS having started on 1 April 2018 and MATS on 1 July.

    We understand and have planned for the significant increase in data that we will receive. We’re focussed on continuing to build resilience into our systems and are moving more to the cloud as it gives us better ability to deal with the waves of data coming in.

    Single Touch Payroll (STP) started on 1 July 2018 for employers with 20 or more employees (ie substantial employers). Employer on-boarding is tracking as expected and community sentiment has been overwhelmingly positive, even though the transition to STP has been a big change for some employers.

    Our research is showing that there are very high levels of awareness of the change and encouragingly, a number of small employers (19 or fewer employees) have become early adopters of STP and make up to a third of those who have started reporting.

    More broadly, in August last year, the ATO released for the first time, the super guarantee (SG) gap; this estimates the net SG gap at 5.2%, or $2.85 billion of the total estimated $54.78 billion in SG payments employers were required to pay in 2014-15. An update (for 2015-16) will be published in the next ATO Annual Report later this financial year.

    The ATO takes SG non-compliance very seriously. It is about workers and their entitlements under the law. We are concerned about employers who do not pay their employees SG to a fund by the required due date either fully or in part, employers who don’t lodge a statement when required, and employers who don’t pay the super guarantee charge (SGC) to the ATO when required.

    All employees’ complaints regarding failure of their employers to pay are actioned.

    This financial year, we have established an SG Taskforce which is part of the SG Integrity Package; it’s targeted at improving the ATO’s visibility and addressing the key barriers to SG compliance. In 2018-19 the taskforce plans to close 2,658 cases, raising $134 million in liabilities. We’re using new data models – nearest-neighbour risk models – to identify non-compliant employers and ensure that employees receive their correct SG entitlements. These new data models are proving to have a high strike rate.

    Where visibility becomes a reality and drives behavioural change, this is where all the work and planning comes together and is very exciting for the ATO.

    STP will give us visibility of an employer’s SG obligation; each quarter we will compare the reported obligation with the contribution made. These new data sources will add significantly to our understanding and identification of non-compliance.

    This powerful change will bring visibility to when a payment is received into a member’s account and give the ATO an early warning when a payment hasn’t been made. This will provide a timely visibility we didn’t have previously. Funds will report the amount of contributions made for a member within 10 business days of processing it into a member’s account. Eventually, we’ll be able warn people or check with them much earlier than we can at the moment and that’s really going to be a win for everybody. More transparent information will give the ATO stronger teeth as a regulator.

    In the near future, members will be able to see all their reported employer contributions through STP and we expect that once members have visibility and the required data, they will question where their payments are; this alone will have a positive impact on SG compliance.

    Individuals who log into the ATO portal via myGov can now view the details of all their super accounts, both those held in a fund or with the ATO. While in ATO online, people can also consolidate their super accounts if desired.

    Account information that is visible includes: balances for all accounts, including those accounts transferred to the ATO as unclaimed; insurance indicators; total super balance (TSB); transfer balance cap (TBC) details; and the status of bring-forward arrangements relating to non-concessional contributions. MyGov can be used to:

    • view all the events that have been considered when calculating the balance of a transfer balance account (TBA)
    • consolidate super accounts
    • identify if a TBC has been exceeded
    • identify which fund to contact if any of the transactions are incorrect
    • download TBA information and print or email it.

    Later this year, tax agents will also be able to access this information via the tax agent online service.

    We’ve learned from past behaviour that if people know that others can see the data, this will drive a positive compliance outcome. The new data will add greatly to what we know and we’ll be able to target the cases where people are seriously and regularly not complying with their SG obligations.

    The ATO, as custodian of all this information, is expected to collate all the different sources of information into one complete picture for members.

    Looking ahead for super, from 1 July 2018, we also saw the start of the First home super saver scheme (FHSS) measures. These allow individuals over 18 who have never owned a home to apply to release voluntary contributions from their fund to buy their first home.

    During the period 1 July to 6 August 2018, 1,449 FHSS determinations were made and 592 people requested a release of their FHSS amount. In the same period, the ATO issued 498 release authorities to super funds totalling $5,341,856.18. This equates to an average requested release amount of about $10,727.

    The ATO has received and processed 185 release authority statements from funds, totalling $2,074,533.15. Sixty-one applicants have been identified as potential credit offset candidates and 17 financial hardship applications have been lodged. The hardship provision allows people to apply for the FHSS scheme if they have lost all property interests as a result of a hardship event including bankruptcy and divorce. Of these applications, eight have been approved and six disallowed. All applications were completed within the service standard.

    We remain strongly committed to working with industry and fund members to ensure individuals can participate in and engage with the super system by gaining timely and improved visibility of their super information to allow them to manage their future retirement savings most effectively and efficiently.

    Thank you.

    Last modified: 05 Sep 2018QC 56758