Alert

Who does this affect?

Employers, trustees, administrators and custodians of superannuation funds.

What do you need to do?

Consider the impact of the far-reaching proposals set out in the consultation paper on your business. Submissions and comments are due by 19 December 2008. We can provide assistance with your submission.

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Michelle Levy  
Partner
T +61 2 9296 2437

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John Edstein  
Partner
T +61 2 9296 2129

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Sydney
Andrew Gray  
 

Melbourne
Murray Kellock  

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Today the Minister for Superannuation and Corporate Law released a two-part consultation paper entitled Superannuation Clearing House and the Lost Members Framework. The issues canvassed in the paper are far-reaching and will be relevant to employers, superannuation trustees, administrators and custodians.

The consultation paper is divided into two parts.

Part A - Superannuation Clearing House

Against the backdrop of a disturbing growth in both the number and value of lost superannuation accounts (approximately 6.4 million accounts and $12.9 billion is currently lost), the Minister is pursuing a commitment made in the 2008-2009 Federal Budget to spend $16 million over three years to establish an optional superannuation clearing house facility.

The proposal is that employers will be able to satisfy their superannuation guarantee obligations (including choice of fund rules) by paying contributions to a single location. The facility will be free for employers with fewer than 20 staff.

The Government asks whether the approved clearing house function should be allocated to a single provider or to multiple providers?

A clearing house’s obligations under the choice of fund rules would be activated when the clearing house received a completed choice form, or other written notification of an employee’s chosen fund. The Government asks the following questions:

• Is the division of responsibilities and obligations between employers and clearing houses in relation to choice of fund appropriate?

• Should employers continue to be required to provide a standard choice form to their new employees?

• Should employees have the option of returning a completed choice form to their employer rather than to the clearing house?

In terms of superannuation guarantee and licensing obligations, the following questions are raised:

• What time limit should a clearing house have for forwarding employer contributions to the appropriate superannuation funds?

• Should the clearing house be required to process salary sacrifice and personal contributions in addition to contributions made to discharge an employer’s SG obligation? If so, should the same time limits apply?

• Does the proposed requirement to hold an Australian Financial Services Licence constitute an adequate level of regulation for approved clearing houses?

Part B - Lost Members

The Government believes that the key shortcomings of the current framework for lost members include the broad definition of “lost member”, the poor reporting and information sharing amongst account providers, and the lack of member engagement with their superannuation.

The Government raises the following questions:

• Should a new definition of a lost member be adopted based on the definition of a non-contactable member in the Corporations Regulations?

• Should superannuation providers report to the lost members register on a more frequent and timely basis?

• Is it feasible for a new portability protocol to be developed that would enable members to provide a single portability request to the trustee of their preferred fund?

• If a new portability protocol was developed should the protocol operate on a voluntary or compulsory basis?

Finally, the consultation paper considers the pros and cons of automatic consolidation of lost accounts. Possible approaches identified in the paper include:

• Automatic consolidation occurring on an opt-out or voluntary basis.

• The opt-out approach would involve lost members being sent prior notification of a pending consolidation. The member could ‘opt-out’ of the consolidation process by advising the ATO within a specified timeframe. Alternatively, members could elect to have any lost account in their name consolidated to an active account.

• A third approach would be to limit opt-out consolidation to lost accounts with specific characteristics, such as balances below $10,000, and then allow voluntary consolidation for all other lost accounts, as well as inactive accounts recorded on the lost members register for search purposes.

A copy of the consultation paper can be found by clicking here. Submissions and comments are due by 19 December 2008.