Update: the ATO has announced ‘compliance flexibility’ for small businesses which miss the SuperStream deadline.
SuperStream is part of the Stronger Super reforms designed to improve administrative efficiency in the superannuation system and reduce costs, partly by moving from paper-based records to electronic transactions. In stages, beginning 1 July 2013, APRA super funds, SMSFs and large and small employers will transition to using SuperStream for exchanging information regarding superannuation contributions and rollovers. The following important SuperStream dates come from the Superannuation Data and Payment Standards 2012 and ATO publications:
The ATO recently issued a Determination so resolve an issue where the In-House Asset rules could apply to an Limited Recourse Borrowing Arrangement (LRBA) which was otherwise complying with both the SIS Act/Regulations and ordinary practice.
The Determination, the Legislative Instrument Self Managed Superannuation Funds (Limited Recourse Borrowing Arrangements – In-house Asset Exclusion) Determination 2014 (2014/SPR/0008), is issued under s71(f) of the SIS Act, which empowers the regulator to make determinations that an asset is not an In-House Asset.
At issue is the exemption provided by s71(8) of the SIS Act. This sub-section provides an exemption from the In-House Asset rules where an SMSF has an investment in a Custodian Trust (or Holding Trust as it is referred to by the ATO) as part of an LRBA. However, as set out in the Explanatory Statement, this exemption does not cover certain circumstances:
- Where a contract has been entered into but the borrowing has yet to commence (Paragraph 19)
- Where a borrowing has been entered into, but the custodian trust does not yet hold the asset – such as where a deposit it made for an off-the-plan unit (Paragraph 21)
The ATO has recently issued a Private Binding Ruling which casts some doubt on 0% interest-rate limited-recourse borrowing arrangements (LRBAs). Should this interpretation be correct SMSFs with LRBAs at 0%, or indeed below-market rates of interest, could owe 45% tax on income relating to the LRBA Investment. Since 2010, based on a number of binding and non-binding ATO sources, there has been increasing comfort with the SIS compliance of related-party LRBAs, including at below-market rates of interest. This broader interest came as a result of minutes of the National Tax Liaison Group (NTLG) Superannuation Technical Sub-group meeting in June 2012, where the ATO said that such an arrangement could be consistent with s67A and s109:
“Yes. A lower than market interest rate or the absence of a requirement to pay interest on money loaned to the trustee by a related party will not prevent the arrangement from being a borrowing for the purposes of section 67A of the SISA”
“a fact that the borrowing is interest free does not cause a contravention of paragraph 109(1)(b) of the SISA as that fact does not make the terms and conditions of the borrowing more favorable to the related party lender than would be reasonably expected if the parties were dealing with each other at arm’s length in the same circumstances.”
SIS regulation 13.14 prohibits SMSFs from allowing charges to be created over fund assets, however as this is Superannuation there are a number of exceptions. The one of interest to this discussion is contained in regulation 13.15A. Broadly, this regulation allows a charge to be created over fund assets in relations to a derivatives contract, however there are a number of requirements.
Recent Update: As announced by the Government, there will be some delay allowed in the implementation timetable for SuperStream.
The ATO is encouraging SMSFs to get ready for SuperStream.
From 1 July 2014 SMSFs will be required to be capable of receiving Employer Contributions information electronically through SuperStream. SuperStream is part of the Stronger Super reforms with the goal of improving the administrative efficiency of the Superannuation system. Up to now SuperStream has largely only been relevant for APRA funds, however from 1 July 2014 part of it will start to apply to SMSFs by requiring them to be able to received contributions information from employers. Integrating SMSFs into the SuperStream system will likely require the use of an SMSF Messaging Provider to act as an intermediary:
Since 30 June 2007 it has been a requirement for new trustees of SMSFs, or directors of the corporate trustee of a SMSF, to sign the Trustee Declaration. The trustee declaration summarises many of the duties and restrictions of a SMSF trustee and should be read carefully and understood, along with the ATOs ‘Self-managed super funds – key messages for trustees‘.
s104A of the Superannuation Industry (Supervision) Act 1993 requires that if a person becomes a trustee of an SMSF, or the director of a corporate trustee of an SMSF, they must:
- Sign the Trustee Declaration within 21 days of becoming a trustee/director
- Ensure the Declaration is kept for at least 10 years
- Present the Declaration to the Regulator if requested