INCREASED CONTRIBUTION REPORTING OBLIGATIONS FOR SUPER TRUSTEES – ARE YOU READY?

August, 2012

On 27 July 2012, Treasury released an exposure draft bill and explanatory memorandum regarding the amendment of the Corporations Act 2001 (Cth) to require superannuation funds and RSA providers to report the contributions they have received to each member on either a quarterly or six monthly basis. As a part of the proposed amendments, the Superannuation Industry (Supervision) Act 1993 (Cth) will be amended to give APRA the power to take action where a superannuation fund or RSA does not comply with the new requirements.

The fund notification measures were designed to address concerns about employers failing to make contributions and its impact on vulnerable employees.

The obligations apply to contributions received from 1 July 2013. Superannuation funds and RSA providers will be required to report contributions to active members within 42 days after the end of the quarter or six month period.

The trustee has two options to report contributions to members:

Quarterly – the trustee must send a message to the member saying they have or have not received contributions during the quarter. The message must be by email, but if email is not possible, by SMS. In addition, the trustee must provide a web-based portal for the member to access and confirm contributions have or have not been made; or

Six Monthly – the trustee must provide a statement to the member by post detailing contributions, fees and charges etc.

There is currently no transition period detailed in the exposure draft bill and explanatory memorandum.

Trustees have a very short timeframe to decide which option they chose and give effect to any systems changes, including administration and reporting systems.

We see a number of practical problems with the exposure draft bill. For example, defined benefit interests are clearly exempt from the amendments. However, trustees are still required to report to members in respect of any accumulation component. The trustee will incur costs (including the re-configuration of its administration system) to enable the reporting system to distinguish between each component of the member’s interest and to report on the accumulation interest only.

In addition, trustees will undoubtedly not have the email address or mobile telephone number of each active member (particularly for larger funds) to enable it to genuinely choose the quarterly reporting option. Accordingly, this option is not a “real” single option for trustees.  They need to have (and incur the costs of) two contribution reporting options in any event.

We note that the exposure draft bill implies a “contributions made” standard. This appears to reflect “contributions made” from the employer’s perspective, rather than “contributions received” from the trustee’s perspective. There appears to be a real practical gap – for example, the employer has “made” the contribution but the trustee may not have “received” the contribution. While this is an ongoing issue for trustees, how can a trustee be expected to regularly report to members on contributions of which it has no knowledge, particularly where a clearing account is involved? The recent case of Colless v Federal Commissioner of Taxation [2012] AATA 441 concerns the receipt of concessional contributions and emphasises the timing and receipt issues experienced by trustees. In that case, concessional contributions “made” to a clearing account by an employer were only considered to have been attributed when they were “allocated” from the clearing account to the superannuation fund. From a practical perspective, the trustee may experience similar timing problems around contributions, particularly now with shorter reporting periods.

Each trustee will be impacted by these changes and we recommend that detailed consideration be given to the impact on the trustee’s business and operations. APRA will have the power to take action against trustees for non-compliance.

Raelene Harrison is a Senior Associate in Mills Oakley’s Financial Services Team.

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