• ATO presentation: superannuation funds

    James O'Halloran, Deputy Commissioner, Superannuation

    Speech to The National Superannuation Conference

    Sydney, 24 - 25 August 2017

    1 Introduction

    I want to thank the Tax Institute for the opportunity to speak at this conference at such a significant time for superannuation advisers and the broader community.

    Through its members, the Tax Institute has greatly assisted the ATO in implementing a raft of super reforms in recent months.

    Reform and change are aplenty across the super industry, whether at the ATO, in the tax and finance profession, large super funds or the SMSF sector.

    So let’s start with the commencement of the 2016 Budget measures. Certainly, your work or ours didn’t stop on 1 July when the majority of changes came into effect. It could be said that 1 July was only the ‘end of the beginning’.

    Since November 2016, we have proactively helped industry and advisers with the changes to ensure that super funds could readily meet their reporting obligations to clients and to the ATO.

    We were, and remain, committed to early engagement to build certainty, provide awareness of transitional reporting arrangements and to promote practical compliance tools that could be relied upon as we moved into 2017–18.

    Of course, the 2016 Budget measures are now part of everyday life. Just as we engaged and collaborated with industry before the changes became law on 1 July, we will continue to work with you through the reporting changes and the continued transformation of our sector.

    As we move towards the 100 days since 1 July 2017, we’ve identified some key areas to assist funds through the transition, particularly in light of the 2016 reforms.

    Moving forward, getting a complete picture of a member’s super account will be crucial for funds, and the ATO, as more timely, accurate data will help to manage the contribution caps, the $1.6 million transfer balance cap, total super balance and other critical changes.

    The three-year bring-forward rule, and its impact on non-concessional contributions, has been flagged as one area of concern alone.

    The emerging relationship between many of the reforms that requires funds and the ATO to have a more holistic and more current view of an individual’s super account is increasingly evident and no doubt will guide many decisions into the future.

    2 The ATO's role in super

    2.1 We’re constantly evolving

    Developing a more contemporary, agile and streamlined system to help you meet the new challenges is a key driver for us.

    To do this, we’re changing reporting systems, developing new tools and resources to help both individuals and tax professionals, and engaging our key partners where possible to ensure the smooth transition continues.

    As super evolves, so does the ATO’s role as one of the industry’s co regulators. We are of course, continually seeking to provide better systems and tools for tax professionals to do the best job for their clients.

    SuperStream has been at the heart of the super ‘ecosystem’ for some time, opening avenues for us all to interact differently as partners in an interconnected series of transactions. It has already enabled business-to-business models of e-commerce and created a shift in thinking to government-to-business transactions.

    Crucially, we created a new data services in SuperTick, remodelled SuperMatch, and developed a fund details register. For individuals, we created an online portal through which they could check and consolidate their super accounts and receive timely information on their super affairs.

    Phase 2 of SuperStream will build on that original premise, leading us to events-based reporting, more tailored messaging, more agile responses to the needs of large funds and tax practitioners, and more visibility of super guarantee payments.

    2.2 Whole-of-government approach

    As a $2.3 trillion industry, super is a vital asset for the nation and a whole-of-government approach ensures that we build and maintain a world-class system.

    We work closely with the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) across large super funds to encourage and assist compliance and ensure obligations are met.

    Both APRA and the ATO are responsible for regulating large funds, while the ATO also regulates self-managed super funds (SMSFs), which are a major part of the market.

    While our role focuses primarily on regulatory, administrative and income tax compliance we increasingly see ourselves as a facilitator, co-originator and co- enabler of real change in the industry.

    We continue to nurture this whole-of-government approach, building on the original memorandums of understanding that allow us to share information with other agencies across the super network.

    2.3 Large super funds

    As at 30 June 2016, large funds held about 62 per cent of the $2.3 trillion in total super assets. This equates to $1.3 trillion.

    There are currently about 240 large super funds, made up of corporate, retail, industry and public sector funds. There are also more than 2,000 small APRA funds (SAFs), with 2016 Member Contribution Statements showing there are over 29 million members (29,262,276) of large and small funds combined.

    The numbers are telling and underline the importance of super for the community.

    In 2014-15, large super funds paid $7 billion in net taxes, representing 2.5 per cent of all federal taxes collected. When you consider that company income tax collected for the same period was 19.4 per cent of all taxes, you can see the significance of large super funds to the economy and the tax system. Managing this is vitally important.

    I’ve spoken before about the ATO Diagnostic Reports that are sent to large super funds. These reports assess funds’ performance in meeting their reporting obligations. The most recent feedback on the reports from fund executives has been overwhelmingly positive and 99 per cent of funds met their reporting obligations to a good or high standard in 2016.

    Funds have actively identified member reporting errors and voluntarily disclosed them to us, which helps to build a stronger system.

    But despite the stellar compliance figures, we must remain vigilant. The large amount of assets held, income generated and tax paid mean that while the incidence of non-compliance is relatively low, such occurrences can have a major impact on the tax and super system.

    In saying this, it is always our endeavour to work with funds and we recognise the important role they play in holding and administering the retirement savings of Australians. I’ll return later to our income tax approach to large funds via our justified trust approach and also outline some key income tax focus areas.

      Last modified: 01 Sep 2017QC 53206