Large super fund industry report
We have released the results of our large super fund risk differentiation framework (RDF), which is intended to assist large funds assess how well you are meeting your superannuation reporting obligations to the ATO.
In July and August 2015, we provided large super funds with a tailored diagnostic report. The report gives each fund an overall risk categorisation based on the consequence and likelihood of your compliance with superannuation reporting obligations:
- the consequence rating is based on your fund's relative ranking on a number of key indicators, such as the number of members, value of contributions and number/value of lost accounts
- the likelihood rating is based on your fund's performance against a series of benchmarks across a range of super-related obligations.
In March 2016, we released the next round of diagnostic reports with the following enhanced features, based on industry feedback:
- we improved the ‘Completeness of MCS’ indicator by changing the benchmark and excluding closed accounts from the member contributions statement (MCS)
- we included the results and scores from 2014 on the 2015 diagnostic report so you can compare the results
- we redesigned the information page and provided the formulas used for determining scores where possible
- we made changes to the statistics fields in the 2015 diagnostic report, and have now included statistics on
- SuperTICK usage
- members with excess concessional and non concessional contributions
- number of release authorities
- number of Division 293 members
- employer contributions via SuperStream.
Summary of results
The success of last year’s RDF process was evident from the very positive response we received from fund trustees and administrators, which included significant voluntary disclosures being made and effective fund engagement initiatives.
As at 31 December 2015, the large funds part of the super industry consisted of:
- 261 funds
- 24 million members
- $1.3 trillion in member account balances.
Large funds have been implementing SuperStream, a government reform aimed at improving the efficiency of the superannuation system. This requires funds to process superannuation rollovers and contributions electronically in a standard format.
We have asked large super funds to:
- review your diagnostic report to determine how your fund is performing against the benchmarks
- make a plan to address any issues or concerns
- engage with us to discuss how we can support you to improve performance. You can email us at: LargeFundDiagnostic@ato.gov.au
Comparative industry results
As part of our large super fund risk differentiation framework, each fund has been given an overall risk categorisation by examining the consequence and likelihood of non-compliance with superannuation reporting obligations. The large fund population was rated using a number of timeliness and completeness indicators. Graph 1 and 2 illustrate comparative scatter graphs for 2014 and 2015. Each dot represents a fund clustered in broad categories.
There are four broad risk categories: higher risk, key client, medium risk and lower risk. Funds categorised as higher risk or key client have significant membership and contribution levels, while lower and medium risk categories capture smaller funds. Key client and lower risk funds are those ranked low in likelihood as they have higher compliance with their reporting obligations. The combination of the likelihood and consequence indicators also enables each fund to be ranked, determining each fund's overall position in the industry, out of a population of large funds in that year. Categorisations and rankings have been calculated using data reported to us relating to the relevant financial year and extracted from ATO systems as at 31 December of that year.
- 100% of APRA funds are SuperStream ready for sending contributions and rollovers – all reaching this by the 30 June 2015 deadline.
- Results have improved overall, having no high risk funds in 2015 compared to two from prior year.
- 99% of funds have a relatively low likelihood of non-compliance (92% are categorised as lower risk, 1% as medium risk and 7% are key clients).
- 55% of funds have improved overall ranking compared to prior year.
- Significant improvement in TFN quality reported on the MCS with Non-individual TFNs remarkably reduced by 25% while Correct TFN quoted increased by 7%.
Key areas for improvement
The top three areas for reporting improvement are:
- lost members over 65 years old - 36% of funds are not meeting the expected standard compared to 24% from last year
- duplicate TFNs on MCS - 15% of funds are below the expected standard compared to 10% from last year
- timeliness of remittance payment variation advices (PVAs) following the payment of government super contributions - only 69% of super co-contribution and 71% of low income super contribution (LISC) PVAs were lodged on time.
Key industry topics
Our analysis of the results highlighted the following key topics.
TFN as a primary locator
The government's intent that a member's TFN is the primary locator remains an essential element in keeping members connected to and reunited with their super.
- We received over 32.5 million MCS forms for 2015 and 99% of these forms were successfully matched.
- The number of accounts with a correct TFN quoted has increased by 7% from prior year.
- Non-individual TFN reported on MCS has significantly reduced to 5.91% this year from 31.35% in prior year.
- Provision of TFN notifications including s299TA, s299TC and Please Resolve notifications continue to be sent to funds regularly as MCS lodgments and amendments are received.
TFN member identity check
- SuperTICK allows APRA funds to validate a member TFN in real time using the same matching as the MCS.
- This validation allows funds to identify if a member TFN is correct at the time of their choosing to improve TFN data quality.
- The newer version of SuperTICK offers additional functions such as providing a TFN to the fund where we can match the member details.
- We encourage use of the new member function as this allows members to view their accounts online.
- SuperTICK is continuously monitored and funds may be contacted to discuss unusual usage or where we can assist in improving TFN quality.
High value lost accounts
We review the top 100 lost balances appearing on the LMR on a regular basis. Many of the highest balance lost accounts are not truly 'lost' but rather remain on the LMR under the inactive definition. Your fund can take the following actions to remove these accounts from the LMR, which will also remove the 'lost' status off the account for both the Individuals Super Portal and SuperMatch display purposes.
If your fund:
- participates in the ATO’s Provision of Updated Information program for lost accounts, use the information provided to contact members and then you can remove these large balance accounts from the LMR as 'found'
- has current contact details for these large balance lost accounts, you may also want to contact the members to verify if they are happy to be permanently excluded from the LMR.
Last year's initiative resulted in 75 lost members with highest account balances being found and removed from the LMR with an aggregate value of $70 million.
Lost accounts with reported balances under $4,000
The small lost account threshold has increased to $4,000 as at 31 December 2015 and should not be included in the full lost member re-report. They should be reported and paid as unclaimed superannuation money by the due date 30 April 2016.
Many funds have considerable numbers of accounts appearing on the LMR with reported balances under the threshold of $4,000. These should be transferred to us as USM. Alternatively, if they have already been transferred as USM they should be reported by the fund on the next LMS as 'transferred'.
Reporting unclaimed super
- Super funds are encouraged to check the eligibility criteria for unclaimed superannuation monies (USM). Generally, funds should report and pay to us any 'lost' accounts where the account holder is either:
- over 65 years old
- reporting a balance less than $4,000.
Unclaimed super strategy
We recently started an initiative to support trustees with information to consolidate unclaimed super monies (USM).
We offered to provide USM information for members of interested funds who hold the active account for their members.
The offer was extended to 260 funds. To date, we have sent out USM data to 60 funds in relation to 115,867 members to the value of $127,722,488.
The funds then have to:
- encourage their members to use myGov to transfer their unclaimed super to their fund
- if any members cannot use myGov, obtain their consent and utilise SuperMatch2 to process unclaimed money transfers
- if SuperMatch2 is not an option, funds can return the member's consent to ATO through a file transfer process.
Lost Member Register full re-report
A full report of the lost member register (LMR) is scheduled for 31 May 2016, which gives funds the opportunity to take accounts off the LMR that cannot be removed via regular fund reporting. This will improve the quality of data on the LMR and result in more accurate account status being displayed for individuals (myGov) and super funds (SuperMatch2).
What to include in the LMR re-report
You must include:
- all lost (L) and inactive (I) members held by the fund as at 31 December 2015
- provider details – ensure that this contains the full, registered name of the fund
- supplier details – ensure that this contains the full, registered name of the supplier; and the contact details of the person lodging the form.
What not to include in the LMR re-report
Do not include any lost accounts that:
- are found (F), transferred (T), or reported in error (E)
- have account balances under $4,000 (excluding defined benefit accounts)
- have been identified, reported and paid as USM accounts included in:
- the USM statement lodged prior to 30 April 2016
- any previous USM statement reporting period.
Our help and assist approach
We have had a positive response to our help and assist approach to help funds meet your super reporting and payment obligations.
- Our compliance reviews resulted in 117,533 members removed from the Lost Members Register with an aggregate value of $174 million. This includes 38,024 members reported and paid as Unclaimed Super Monies valued at $28 million.
- Focus areas over the past year include high levels of engagement with funds to ensure compliance with the Commissioner’s Compulsory Release Authority.
- We have been working in a pragmatic and supportive way with funds to resolve voluntary disclosures about past reporting errors.
We also had an eye on the integrity of the super system through:
- checking tax agent non-compliance with the Departing Australian superannuation payment (DASP) on-line system
- new checks into money finding organisations' compliance with their agreement with the ATO to search for super accounts on behalf of clients.
By categorising funds by relative risk, we will tailor our help and assist approach to address fund needs. Where we identify significant issues, we will:
- work cooperatively with funds to interpret results in their diagnostic report and assist in the resolution of any voluntary disclosures
- continue to present webinars on key topics or areas of risk to help timely compliance
- undertake compliance reviews (including selected MCS reviews and administrator reviews where a fund has multiple IT systems and reporting issues) to enable adjustments to be made before the next reporting cycle.
Where we see continued non-compliance or continued failure to rectify issues, we reserve the right to undertake accuracy and completeness audits with the potential for application of penalties.
To further support the accuracy of reporting and payments by large funds, we will continue to enhance a number of services such as SuperTICK, EmployerTICK and the Fund Validation Service (FVS).
Key findings from analysis of large super funds' reporting timeliness and accuracy to the ATO