New ATO reporting initiatives are the linchpin that will help make the next round of superannuation changes work. Funds will need to use their SuperStream learnings as they start to prepare for the changes announced to apply from 1 July 2017. Regardless of the final shape of these changes, increased ATO capabilities will make super better for both super funds and fund members.
Many of us remember how new APRA superannuation data reporting requirements by super funds was meant to be central to the implementation of Stronger Super – although the reality of this has fallen short of both expectations and initial specifications.
In a similar way, new requirements for reporting data to the ATO – and the reports sent to funds, Single Touch Payroll and online registration of new employees, the further integration of super information into MyGov, and new and revised tax processes will be at the forefront of the next round of super changes.
The considerable resources of the ATO mean this is more likely to be successful. Luckily, the ATO has become more super fund-friendly in recent years and seems to be taking its new partnering model very seriously.
In building on their already significant database of superannuation information, the ATO will have a bigger, more accurate and much more up-to-date and regularly updated data repository.
Super funds do not know how much their members earn, how many other super funds they have, or the total of their members’ concessional and non concessional contributions. They don’t know now and they won’t know in the future. But the ATO knows.
Super funds already rely on reports from the ATO for the Low Income Superannuation Contribution, co-contributions, spouse contributions and the existing very high earners contributions tax (Division 293 taxation). The reliance on these reports will continue but will be extended as the cut-in salary for Division 293 tax is lowered from $300,000 to $250,000, the annual cap on concessional contributions is reduced to $25,000 and the lifetime non-concessional contributions cap of $500,000 is applied.
The ATO is moving towards real-time superannuation reporting and the consolidation of existing reports, and this will make the information available to consumers on MyGov more up to date and reliable. Consumers will then be better placed to confidently make financial decisions (such as consolidating accounts) based on this information and have a better picture of their contribution history – and better know how close they are to their cap limits.
The new reporting is also going to incorporate and consolidate lost member reporting. There’s still over $13.5 billion of lost super out there so there’s still a lot of work to be done.
This will be aided by online registration of new employees for tax file number declaration and Choice of Fund, a new ATO service that’s going to be introduced over the next two years. As part of Single Touch Payroll, this will help improve employer compliance with the Superannuation Guarantee, improve data quality, reduce the incidence of unnecessarily duplicated accounts and lost super.
With this data capability, the government will need to insure consumer protection against misuse of data and protection of privacy is monitored and enforced.
These changes are an opportunity and a challenge for super funds, both in relation to member engagement and administrative efficiency.
Funds that have a whole-of-business understanding of these changes, the importance of getting them right, and the ability to harness them to achieve strategic objectives are the funds that will be most future-proofed.
Executive Superannuation Policy Advisor, VIC