What are effective 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 super fund is named.
If the successor fund transfer (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. New notices and authorities will need to be issued under the successor fund details.
Some taxation-related notices and authorities are discussed in more detail below. However, this is not an exhaustive list.
You can lodge an enquiry through our Super Enquiry Service for any issues about other notices and authorities.
Notices
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.
TFN declaration
A successor fund will not be required to obtain a new TFN declaration for a member who has previously provided this declaration to the transferring fund.
PAYG withholding variation application
A PAYG withholding variation application (both upward and downward variations) made to a transferring fund can continue to apply for the successor fund.
The transferring fund will need to identify members who have made an application and advise the successor fund.
Personal super contributions deductions notice
The Income Tax Assessment Act 1997 provides funds with guidance on what members can do and their responsibilities during fund transfers.
The Act:
- allows for a member to contribute to the transferring fund
- but provide a valid Notice of intent to claim or vary a deduction for personal super contributions (NOI) to the successor fund
- and receive acknowledgment 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 give a variation notice to the successor fund, even though the contribution, valid NOI and acknowledgment came from the transferring fund
- prescribes transferring funds to ensure they provide details of acknowledged notices of intent to the successor fund enabling the successor fund to treat any variations correctly
- 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.
While the law requires the transferring fund to acknowledge a valid notice without delay, there may be a limited-service period during which the transferring fund may recommend their members do not give them a NOI.
If this situation does occur, we:
- are willing to accept that the original NOI was effectively not given
- accept that the member can give a new NOI to the successor fund and have it acknowledged.
The transferring fund should prompt members if a NOI cannot be acknowledged, The member should submit a new NOI to the successor fund. For further information, see Notice of intent to claim a deduction.
Risk only accounts
Where a member's interest in the successor fund is a risk only account with no investment component (zero balance), a member can provide a NOI to the successor fund in respect of contributions made to the transferring fund.
Information transfer
The successor fund will not know if members made any contributions (before the SFT) in the same or previous financial year.
They will therefore require personal contribution data as well as details of the NOI process already completed (if any) at the time of SFT.
This enables the successor fund to determine what the member is entitled to claim or correct. This information is to be passed from the transferring fund to the successor fund in an SFT.
Contributions splitting
A member can generally lodge an application with their super fund to split their contributions (if the fund allows it) in the:
- financial year immediately after the financial year in which the contributions were made
- financial year the contributions were made – only if their entire benefit is being withdrawn before the end of that financial year as a rollover, transfer, lump sum benefit or combination of these.
However, contributions can only be split by the trustee of the fund to whom the contributions were made. Once the SFT has occurred, the member has lost their opportunity to split their contribution with their spouse.
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 SFT. The trustee will undertake the split as part of the SFT process.
This notice must be given to the trustee of the transferring fund before, or at the same time as, lodging a contributions splitting application. For more information, see Contributions splitting for members.
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 on this issue.
Binding death benefit nominations
All binding death benefit nominations (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 and splitting superannuation
The transferring fund should inform the successor fund of any member’s account which is subject to a family law agreement, court order or consent 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
The transferring fund should notify members via the Significant Event Notice to avoid electing release from the transferring fund, due to the impending SFT. However, there are situations where timing issues or client needs will require release prior to the SFT.
We are unable to suppress the issue of a Release Authority (RA) for time critical elections, such as the first home super saver scheme. Members can be significantly disadvantaged if elections are not processed promptly.
Funds must provide a valid response to all RAs, including where the due date is during the limited-service period via the correct channel if they are unable to action the RA, as per the Rollover user guide. We recommended that current and future due dated RAs are actioned prior to the SFT date where practicable, as a new release authority will not be issued to the successor fund while the original notice is still outstanding.
Note: all RAs must be responded to via the same channel by which they were issued. For more information, see Release authorities.
Funds should lodge an enquiry through our Super Enquiry Service for advice on the management of RAs during an SFT.
Commissioner's commutation authorities
If a Commissioner's commutation authority (CCA) is received by the transferring fund after the account has been closed, the transferring fund needs to report in the super transfer balance account report (TBAR) as follows:
- CC2 event (in part), value = 0.00 and account status = Closed.
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.
If the account has undergone an intra-fund transfer (IFT), then it is expected that you will be able to identify the correct income stream and action any commutation authority that may contain the previous account details.
Example: Income stream account subject to an IFT
Betty starts an income stream, and the super fund uses the member account number of 00012345. After a registry system migration, the fund changes the account number for Betty's income stream to ABC123.
The fund:
- receives a commutation authority for Betty's account 00012345 and has put systems in place to recognise that account 00012345 is now account ABC123.
- can comply with the commutation authority in full, as the income stream has not stopped or changed, and commutes the required amount from income stream ABC123 by the due date.
- does not report an MCO for MATS, it lodges a TBAR reporting a CC1 and uses account number 00012345 to match the commutation authority and avoid further ATO contact questioning the account number.
- notifies Betty using whichever account number will be most meaningful for her.
Note: If your systems do not allow you to report the TBAR with the legacy account number, we understand that you will need to use the new member account number. Keep in mind that we may need to make further contact with you to clarify what has occurred in these instances.
Fund income tax
Fund income tax will impact upon member balances. Therefore, funds that are contemplating an SFT have an obligation to consider the tax impacts.
You can lodge an enquiry through our Super Enquiry Service for assistance with SFT issues (where your enquiry relates to fund income tax issues, it will be referred to the appropriate area in the ATO).
No-TFN contributions income tax offset
The no-TFN tax offset is the total amount of the tax payable on amounts of no-TFN contributions for which the following conditions have been met.
For the 2020–21 income year and later income years, a successor fund is entitled to claim the no-TFN tax offset if both the following conditions are met:
- Tax was payable by the previous fund on an amount of no-TFN contributions in any of the previous 3 income years or relevant part year for the year in which the SFT occurred.
- The no-TFN contributions were made to the previous fund to provide superannuation benefits for an individual who has never quoted (for superannuation purposes) their TFN to the previous fund but has quoted their TFN to the successor fund for the first time in the current income year.
To allow the successor fund to accurately claim the no-TFN tax offset, it is suggested that the transferring fund provides enough details of previous no-TFN contributions from the previous 3 income years prior to the SFT and the year in which the SFT occurs.
Division 310 – loss relief for merging super funds
From 1 July 2020 the temporary tax relief for merging super funds was made permanent. Since December 2008, tax relief under Division 310 of the Income Tax Assessment Act 1997 has been available for merging complying super funds to transfer revenue and capital losses, and to defer taxation consequences on gains and losses from revenue and capital assets, subject to funds meeting certain conditions.
How to obtain certainty that Division 310 requirements are met
To obtain certainty that the Division 310 requirements have been met, you could seek a private binding ruling from the ATO's early engagement for advice service. We recommend you email PGIAdvice@ato.gov.au as soon as practicable after the decision to undertake the SFT is made to ensure we are in a position to provide advice well in advance of the SFT date.