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  • Managing member accounts

    Updating member account transactions

    Before closing member accounts after an SFT, the transferring fund will need to ensure the reporting of member account transactions and contributions is up to date and accurate at the time of the transfer.

    In line with normal member transaction reporting obligations, contribution information is required to be reported within 10 business days – or a later date if Commissioner allows – of allocation to a member's account. These requirements are outlined in detail in the MATS Business Implementation Guide.

    See also:

    Updating member account attributes

    As with member-instigated rollovers, funds undergoing an SFT will have a requirement to report open or closed accounts and account changes, as outlined in the MAAS Business Implementation Guide (MAAS BIG) and Member account reporting and validation.

    See also:

    Member account identifiers

    It is not mandatory for a successor fund to use the same member account identifiers as the transferring fund.

    See also:

    Reporting open accounts

    A successor fund should open new member accounts shortly after the transferring fund closes member accounts. This ensures that the new member details are provided to the ATO to allow any payments to be made to the new account and for account information to display on ATO online.

    See also:

    Reporting closed accounts

    A transferring fund should close member accounts before the successor fund opens new member accounts. This reduces the risk that members will see old account information on ATO online.

    See also:

    Example

    Fund A is undergoing an SFT to Fund B. Fund A must report member accounts as 'closed' within 5 business days or such later date as the Commissioner may allow of closing the member accounts. Fund B must report member accounts as 'open' within 5 business days or such later date as the Commissioner may allow of opening the member accounts.

    Fund A and B have discussed and agreed when they expect the closing and opening of member accounts to occur. Fund A advises Fund B as soon as the member accounts have been closed to allow new member accounts to be opened shortly after.

    End of example

    Lost members

    The transferring fund will need to provide the successor fund all information regarding any lost members, including the date of last member contact, last contribution date and reason the members are considered lost - uncontactable or inactive.

    The successor fund will need to ensure the lost status of the member account attributes are accurately reflected when new accounts have been opened.

    See also:

    After the SFT is completed, any subsequent changes to a member's lost account status will be updated by the successor fund using the relevant service.

    Unclaimed super money (USM)

    An amount received by a successor fund as a result of an SFT is not considered to be an amount received in respect of a member, nor does it constitute contact from the member. As such, an SFT will not 'reset the clock' in determining whether an amount payable to a member is taken to be unclaimed money. The date of last contact and contribution will need to be provided to the successor fund by the transferring fund.

    If a transferring fund holds outstanding section 20C notices from the ATO identifying former temporary residents, the transferring fund should respond to the notices prior to the SFT.

    However, where a transferring fund cannot process a section 20C notice for a particular member due to a pending claim, the transferring fund must respond to the section 20C notice with error code SUPER.GEN.RLVR.7 – see Rollover v2.0 User Guide PDF 4KBExternal Link

    For example, a transferring fund may have a pending Departing Australia Superannuation Payment claim which will be paid to the member prior to the SFT, rather than to us as USM.

    If, after responding to the notice with an error code, the pending claim is unsuccessful, the following actions can be taken:

    • The transferring fund – if the fund still holds the account they can pay the amount to us as USM in the next reporting period via the Rollover Transaction Request using USM reason code ‘R’.
    • The successor fund – if the SFT has taken place and the account has been transferred then the successor fund can pay the amount to us as USM in the next reporting period via the Rollover Transaction Request using USM reason code ‘R’.

    See also:

    • Unclaimed money – for funds in meeting their USM obligations will also apply to SFTs.

    Example

    Fund A is undergoing an SFT to Fund B. Member 1 of Fund A, is over age 65, has not been in contact with Fund A for 4 years, letters to Member 1 have been returned to Fund A unclaimed, and Fund A has not received a contribution for Member 1 within the last year. Member 1 is considered lost uncontactable.

    Fund A will provide the date of last contact and last contribution for Member 1 to Fund B. Fund B will open a new member account and update the lost status as 'lost uncontactable'.

    A year after the SFT, Fund B has made reasonable attempts but is still unable establish contact with Member 1. As Member 1 has not been in contact with either Fund A or Fund B for over 5 years and neither Fund A or Fund B have received a contribution for Member 1 within the last 2 years, the account balance should be paid to us as USM.

    End of example

    Pending terminal medical condition (TMC), temporary disability and death benefit payments

    Problems may arise in an SFT where members have provided their fund with a terminal medical condition certification and the benefit does not need to be immediately withdrawn. A TMC cannot be rolled over, as it does not meet the definition of a rollover.

    There may also be issues with death benefits and temporary disabilities where payment is pending but not processed at the time of the SFT. Death benefit payments to a non-dependant and temporary disability payments also do not meet the definition of a rollover.

    As these payments are 'pending' it means that a condition of release has been met; and therefore, the benefits would be unrestricted non-preserved.

    Therefore, if the transferring fund transfers a pending TMC payment, a temporary disability payment or a death benefit payment to a non-dependant to the successor fund, it will be considered to be a non-concessional contribution.

    In these situations, it is possible that the non-concessional contribution result in an excess non-concessional contributions tax assessment for the member.

    If this assessment arises, the member can apply to the Commissioner for an excess contributions determination to disregard the contribution due to special circumstances.

    To avoid such issues, the transferring fund can:

    • instruct the member/beneficiary to remove any certified TMC benefit before the SFT
    • process pending disability and death benefits before the SFT.

    Next step:

    Lump sums – disability modification

    In the same way as for member-instigated rollovers, data will need to be transmitted to the successor fund about each member to enable the disability modification calculation to be done if the member later becomes disabled and claims a disability super lump sum. This will include:

    • the date the member joined the transferring fund
    • if a rollover amount was received by the transferring fund with an earlier service period start date for that member, that earlier start date
    • for an employer-sponsored fund, when member’s employment started, if that was before to the start of their fund membership.

    Pensions

    Where an SFT involves members in receipt of pensions, the pension should stop in the transferring fund, and a new one start in the successor fund.

    The reporting requirements for retirement phase events will differ depending on the type of pension a member receives.

    Superannuation income streams

    If the transferring fund initially reported a SIS eventExternal Link (superannuation income stream) for the member, the transferring fund will report an MCO eventExternal Link (member commutation) upon ceasing the pension. The date of the MCO event will be the SFT date. The value of the MCO event will be the value at the SFT date.

    The successor fund will report a SIS event. The date of the SIS event will be the SFT date. It would generally be expected that the value of the MCO event and SIS event would be the same.

    The transferring fund must report the MCO event simultaneously or before the successor fund reports the SIS event.

    Note: The reporting of the commutation and new income stream will not suffice to close and open the accounts. In addition to the above event reporting, the relevant closing of the transferred accounts and opening of the new accounts must also occur, via the relevant service.

    Child death benefit income streams

    If the transferring fund initially reported an ICB eventExternal Link (child death benefit income stream) for the member, the transferring fund will report an MCO event upon ceasing the pension and the successor fund will report an ICB event. The dates and values of the MCO event and ICB event and the timing of the reporting must follow the manner outlined above.

    Reversionary income streams

    If the transferring fund initially reported an IRS eventExternal Link (reversionary income stream) for the member with an effective date of the date of death of the member, the transferring fund will report an MCO event upon ceasing the pension and the successor fund will report a SIS event. The dates and values of the MCO event and SIS event and the timing of the reporting are determined in the same manner as outlined above.

    Note: The ATOs application of the initial credit to the individual’s transfer balance account will not be impacted by the SFT arrangement, even if the SFT occurs during the 12 months between the date of death of the member and the credit arising in the individual‘s transfer balance account.

    Reversionary child death benefit income stream

    If the transferring fund initially reported an ICR eventExternal Link (reversionary child death benefit income stream) for the member with an effective date of the date of death of a member, the transferring fund will report an MCO event upon ceasing the pension and the successor fund will report an ICB event. The dates and values of the MCO event and ICB event and the timing of the reporting are determined in the same manner as outlined above.

    Note: The ATOs application of the initial credit to the child's transfer balance account will not be impacted by the SFT arrangement, even if the SFT occurs during the 12 months between the date of death of the member and the credit arising in the child’s transfer balance account.

    Capped defined benefit income streams

    It is recognised that for capped defined benefit income streams there may be some issues with reporting the new income stream as a post 1 July 2017 income stream.

    Next step:

    Minimum pension standards

    Transferring fund

    The trustee of the transferring fund is responsible for ensuring the minimum pension payment requirements are met for each of the pension's payable from the beginning of the current financial year up to the date of the SFT.

    If a pension stops being in the retirement phase because the minimum pension payment requirements are not met before the date of the SFT, the transferring fund must report a STO eventExternal Link (income stream stops being in the retirement phase) for the member.

    The date of the STO event will be the stop time. The value of the STO event will be the value at the stop time. The successor fund will report a SIS event. The date of the SIS event will be the SFT date. The value of the SIS event would be the value at the SFT date.

    The transferring fund must report the STO event simultaneously or before the successor fund reports the SIS event.

    Successor fund

    The trustee of the successor fund is responsible for ensuring the minimum pension payment requirements are met for each of the pensions payable from the date of the SFT to the end of the relevant financial year.

    An exception to this responsibility is prescribed under clause 4 of Schedule 7 to the SISR where the commencement of the new pension is on or after 1 June in the relevant financial year.

    The successor fund will need to recalculate the minimum pension payments based on the member account balance at the time of the SFT, or, for an SFT after 1 June, based on the account balance at 1 July the following financial year.

    Example

    Fund A is undergoing an SFT to Fund B on 1 August 2018. Member 1 is in receipt of an account-based pension with a minimum pension amount of $10,000 for the 2018-19 financial year.

    The number of days from the beginning of the financial year (1 July 2018) to the day the pension is commuted (1 August 2018) is 32. The number of days from the commutation to the end of the financial year (30 June 2019) is 333.

    The Fund A Trustee is required to make a pro-rata minimum pension payment of $876.71 ($10,000 x 32 ÷ 365).

    The Fund B Trustee is required to make a pro-rata minimum pension payment of $9,123.29 ($10,000 x 333 ÷ 365).

    End of example

    Taxable and tax-free components

    Under paragraph 307-125(3)(d) of the ITAA 1997, the new income stream after an SFT will retain the same proportions of taxable and tax-free components as the original income stream.

    For super lump sums that did not arise as the result of a commutation of an income stream, the tax-free and taxable components are determined just before the SFT date.

    Department of Human Services (DHS) treatment of income streams

    For information about reporting income streams to DHS if an SFT takes place, visit the Department of Human Services (DHS)External Link

    Re-reporting

    Obligations

    Before to the SFT date, the transferring and successor funds and their respective administrators must establish a plan for managing member reporting before, during and after the transition and identify any blackout periods where no reporting will occur. This includes an agreement as to the dates each fund will be responsible for re-reporting, regardless of which fund made the error or omission.

    The transferred members will be left in a difficult position if errors or omissions in reporting are discovered that cannot easily be rectified by re-reporting and there is no agreement in place between funds to manage these.

    The transferring fund's ABN should remain open as long as practicable during and after the transition, to allow the transferring fund or its administrator to correct previous reporting if required. Alternatively, the transferring fund can ensure all appropriate accesses have been provided to the successor fund and its administrator so that corrections to previous reporting can be made by the successor fund.

    Next step:

    Information transfer

    The funds should also arrange for a data handover to occur to allow the successor fund and its administrator to obtain relevant member information and supporting documents from the transferring fund's administrator and retain access to these records for any corrections to reporting that may arise.

    Members who identify an error in reporting should be directed to contact the successor fund to request that the successor fund correct the error.

    If the successor fund's administrator does not have enough information to correct the error, the successor fund should first attempt to get that evidence from the member. If required, the successor fund can request data from the ATO.

    See also:

    • Amendments – for further details on when to re-report and channels used.

    Data and payment standards

    The Superannuation Legislation Amendment (Stronger Super) Act 2012 established a framework to implement the data and payment standards that apply to processing rollovers and super contributions.

    Rollovers

    A transferring fund that pays a rollover super benefit, including a death benefit rollover, to a successor fund must provide the successor fund a statement in the approved form.

    See also:

    A rollover statement is not required when both funds share a common trustee. An SFT that involves the installation of a single trustee for the merging funds will avoid these reporting obligations.

    Another method to transfer information outside of the data standards may be used, which applies only:

    • to transfers to a 'successor fund' as defined in the Income Tax Assessment Act 1997
    • when both parties agree to use this method and not use the data standards.

    When these conditions are not satisfied, the SFT will be treated like any other rollover.

    For example, two super funds may already share a common administrator or a common registry platform and so the transfer may simply involve a formal change in the fund to which particular account data is attributed. Alternatively, a merger may only involve a change in ownership of a computing platform on which account records continue to be held.

    As with member-instigated rollovers, to ensure sufficient information is provided to allow correct treatment of the rollover benefit – funds will need to refer to:

    Updating product details

    Funds must provide rollover and contribution certification details of its products using the Fund Validation Service (FVS).

    Unique Superannuation Identifier (USI) details

    The trustee of the transferring and successor fund will need to provide or update USI details in line with the requirements outlined in the Lodge super product (FVSU).

    The transferring fund will need to end date its USI as a significant change using the FVS 28 days prior to the effective date. It is possible for a successor fund to retain a transferring fund's SPIN format USI. However, an ABN format USI cannot be transferred between funds.

    SPINs are administered by APIRExternal Link, an independent, privately owned company, and are subject to APIR rules. Funds considering retaining a SPIN should first contact APIR.

    To retain a transferring fund's SPIN format USI, after the transferring fund has end dated the SPIN format USI, the successor fund will need to lodge a new entry through the FVS with that SPIN format USI against the successor fund's ABN effective from the following day. Funds can contact SuperCRT@ato.gov.au if there are any issues in updating the FVS.

    If a successor fund has retained a SPIN format USI from a transferring fund and the SPIN format USI will be later decommissioned, member accounts transferred under the SFT will need to be closed and opened again by the successor fund with the successor fund's USI.

    Example

    Fund A is undergoing an SFT to Fund B. The Fund A Trustee will end date Fund A's USI only after the SFT date to ensure the rollover has been completed.

    End of example

    Payment information

    The transferring fund should communicate with employers to ensure future contributions are correctly directed to the successor fund. During the transition period, the successor fund may also need to contact any employers who have not yet updated their employees' fund details.

    Old bank accounts should be kept open during the transition after the SFT to catch any trailing contributions to avoid payments being rejected to the employer.

    Errors identified in product details

    As with member-instigated rollovers, any significant errors identified by a trustee will need to be immediately rectified – see Errors identified in the FDR

    Notices and authorities

    In general, notices and authorities are only effective in relation to the trustee to which they were provided by the member, or on which a specific fund is named (such as in the case of a Commissioner Commutation Authority (CCA) for transfer balance cap purposes).

    If the SFT involves a change of trustee (and possibly even if the trustee remains the same), the validity of the notices and authorities held by the transferring fund in respect to its members will expire.

    Some taxation-related notices and authorities are discussed in more detail below; however this is not an exhaustive list.

    Next step:

    TFN notices

    A transferring fund may report a new member account to the ATO and be returned an unmatched message response. We suggest the transferring fund follow through to action a 'Please Resolve' notice. If this is not possible before an SFT, the transferring fund should engage the successor fund to resolve the issue.

    See also:

    Notice of intent (NOI) to claim or vary a deduction for personal super contributions

    The Income Tax Assessment Act 1997:

    • allows for a member to make a contribution to the transferring fund but provide a valid NOI to the successor fund (and receive acknowledgement of receipt of the NOI from a successor fund), even though the contribution was not made to the successor fund
    • allows for a member to make a contribution and provide a valid NOI to the transferring fund (and receive acknowledgement of receipt of the NOI from the transferring fund), but vary this NOI by giving the variation notice to the successor fund.
    • does not allow the successor fund to acknowledge a notice where an NOI is given to a transferring fund in the few days prior to the SFT occurring and an acknowledgment has not been issued by the transferring fund. Whilst the law requires the transferring fund to acknowledge a valid notice without delay, there may be a blackout period during which the transferring fund may recommend their members do not give them a NOI.
      • If this situation does occur, however, the ATO are willing to accept that the original NOI was effectively not given; the member can give a new NOI to the successor fund and have it acknowledged. The transferring fund should prompt members if an NOI cannot be acknowledged.

    See also:

    Information transfer

    As the successor fund will not know if members made any contributions before the SFT in the same or previous financial year, the successor fund will require personal contribution data and details of the NOI process already completed (if any) at the time of SFT to determine what the member is entitled to claim/correct. It is recommended that this information is passed from the transferring fund to the successor fund in an SFT.

    Contributions splitting

    As part of the notification sent to members by the transferring fund about an impending SFT, a reminder about contributions splitting should be included. Members will be prompted to give the trustee of the transferring fund a notice of intent (NOI) to split before the merger, and the trustee will undertake the split as part of the merger process.

    A NOI must be given to the trustee of the transferring fund before, or at the same time as, lodging a contributions splitting application.

    Generally, contributions can only be split by the trustee of the fund to whom the contributions were made. However, section 328 of SISA allows relief from that prohibition in certain circumstances.

    See also:

    Authorities

    Bankruptcy orders

    In an SFT where account freezing notices are current, the transferring trustee may need to await the outcome of the freezing notice, subject to any legal advice obtained by the trustee in relation to this issue.

    Binding death benefit nominations (BDBNs)

    All BDBNs attached to member accounts will need to be reviewed by both the transferring and successor fund to determine their validity and currency (most have a 3 year validity) before and after the SFT.

    If a member is a member of both the transferring fund and the successor fund, a new BDBN may need to be completed with the successor fund, dealing with both interests.

    Family law agreement/court order/consent order to split superannuation

    The transferring fund should inform the successor fund of any member’s account which is subject to an agreement or order to split super which has not been completed. It should also inform the successor fund of any un-actioned applications by ‘an eligible person’ for information about the super interest of a member.

    For defined benefit funds, Regulation 29 of the Family Law (Superannuation) Regulations 2001External Link applies to determine the gross value of defined benefit super interests for these purposes.

    Release authorities and refund notices

    The transferring fund should notify members that due to the impending SFT, they should avoid electing release from the transferring fund as the transferring fund may not be able to action the release authority.

    The ATO may issue a new release authority to the successor fund if the transferring fund returns the original stating it cannot comply with it by releasing the specified amount.

    The timeframe for the successor fund to action the new release authority will restart on the day that the new release authority is issued.

    Commissioner's commutation authorities (CCA)

    If a CCA is received by the transferring fund after the account has been closed, the transferring fund would need to report a Member Account Transaction Service (SPRBRACCTX.0001) web serviceExternal Link PDF, 428KB (unable to commute because the maximum release amount is Nil).

    We will then re-assess the member and take the next appropriate action. If the member is still in excess then a CCA may be issued to the successor fund.

    Fund income tax

    Funds may require guidance before, during and after an SFT on some or all of the following topics. In these instances, they should request early engagement advice to ensure they receive the most appropriate and up to date advice.

    • administration expenses
    • merger costs
    • post-merger amendment of income tax returns of wound up funds
    • exempt current pension income
    • no-TFN tax offset
    • foreign income tax offset (FITO)
    • assets included in transfer
    • CGT and loss relief
    • lodgment of income tax returns, and the correct inclusion of assessable contributions.

    Defined benefit funds

    Reporting notional taxed contributions

    A transferring fund will need to identify and report member accounts which are eligible for the grandfathering provisions that apply to a member's notional taxed contributions (NTCs).

    See also:

    Division 293 tax deferred debt

    If a transferring fund has received a notice from the ATO advising that a deferred debt account has been created, they should provide this notice to the successor fund to assist them in complying with their reporting obligations.

    The successor fund should provide us with details of members transferred to them with a deferred debt account. The details should include the name of the transferring and successor funds, member name and member account number and client identifier for the member in both the transferring and successor fund.

    An end benefit notice does not need to be provided in the case of an SFT.

    See also:

    Transferring fund checklist

    Notify members of SFT

     

    Establish plan with successor fund to determine the dates each fund will be responsible for making amendments and identify any reporting blackout periods

     

    Arrange for data handover to successor fund of all relevant member information and supporting documents required to make amendments

     

    Finalise reporting of member transactions/contributions up to the SFT date

     

    Provide successor fund all information on lost members

     

    Action any outstanding section 20C notices (unless there is a pending claim)

     

    Process pending disability and death benefits, or instruct the member/beneficiary to remove any certified terminal medical condition benefit

     

    Provide data to successor fund for disability modification calculation

     

    Close old member accounts and advise successor fund once completed

     

    Provide rollover statement to successor fund (if required)

     

    Inform employers of new contribution details

     

    Keep old bank accounts open to catch trailing contributions

     

    End date USI

     

    Report relevant event type upon ceasing pension with date and value at SFT date

     

    Ensure minimum pension payments are met from start of income year to SFT date

     

    Provide reminder to members on outstanding notices/authorities and/or provide to successor fund (if relevant)

     

    Provide successor fund any ATO notice of deferred debt account

     

    Successor fund checklist

    Establish plan with transferring fund to determine the dates each fund will be responsible for making amendments and identify any reporting blackout periods

     

    Arrange for data handover from transferring fund of all relevant member information and supporting documents required to make amendments

     

    Open new member accounts shortly after transferring fund has closed old accounts

     

    Update member lost status based on information received from transferring fund

     

    Report SIS event upon commencing new pension with date and value at SFT date

     

    Ensure minimum pension payments are made from SFT date to end of income year

     

    Action any notices/authorities (where appropriate) provided by members/transferring fund

     

      Last modified: 08 Aug 2018QC 56421