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APRA releases final guidance for superannuation trustees on contribution, benefit accrual and payment standards

The Australian Prudential Regulation Authority (“APRA”) this week released two Superannuation Prudential Practice Guides (“SPGs”), which replace existing APRA guidance on the contribution, benefit accrual and payment standards under the SIS Act and Regulations.

On 4 April 2011, APRA released the following new SPGs affecting superannuation funds:

  • SPG 270 - Contribution and benefit accrual standards for regulated superannuation funds
  • SPG 280 - Payment standards for regulated superannuation funds and approved deposit funds

APRA issued drafts of these SPGs in September 2011 for comment by the industry.  Our summary of the key issues in the drafts is set out in a previous alert, which you can read by clicking here.

In this alert, we summarise the main differences between the draft SPGs and the final versions.

The final versions of the SPGs take effect immediately.

Contribution and benefit accrual standards (SPG 270)

SPG 270 replaces Superannuation Circular No. I.A.1 Contribution and Benefit Accrual Standards for Regulated Superannuation Funds, Update on classification of superannuation contributions, and information previously contained in Frequently Asked Questions – Clearing Houses.

Contributions made in error

  • APRA has substantially revised its guidance on this topic, which is provided to assist trustees in formulating a “policy on the classification and treatment of contributions made ‘in error’”.  The guidance does not override the trustee’s legal obligations.
  • APRA has replaced the three-fold classification of errors in the draft SPG with two: an error may be an “administrative error”, or an “error” with “extraordinary circumstances”.
  • APRA says that an administrative error “may be rectified without reference to APRA” provided the trustee is satisfied based on the evidence that it occurred.  The types of errors which APRA includes in this category are errors which may have arisen “from issues in communicating or processing an instruction or from a transposition or a computer error”.  It would cover clerical errors, computer malfunctions, or contributions made contrary to member instructions.  APRA expects the trustee to consider the validity of the contribution and whether the remedy of “legal rectification” is available.
  • Other types of errors which have resulted in a valid contribution may not be rectified by the trustee.  However, APRA says that it would be prepared to consider an application for a modification of the benefit payment standard in SIS Regulation 6.17(2) if “extraordinary circumstances” could be demonstrated.
  • The following types of circumstances are not regarded by APRA as being “extraordinary circumstances”: adverse taxation consequences, where the decision to contribute is based on incorrect or inadequate knowledge or advice, or where the member intended to make the contribution but did not know or understand the consequences.

It is possible that a trustee could be placed in a difficult position if the APRA guidance on contributions made in error conflicts with other guidance given by the ATO or its legal obligations.


APRA states that “a prudent trustee will ensure that all the fund’s policies and procedures for contributions processing are fully aligned”.

Validity of contributions

APRA expects the contribution processing systems of each fund it manages to be “sound” (rather than requiring trustees to ensure that they can determine the validity of any contribution received).

Non-member contributions

In addition to expecting trustees to develop policies and procedures for dealing with contributions received before a formal member application is received and processed, APRA also expects trustees to establish procedures to ensure any membership or contribution restrictions in the fund’s governing rules are complied with.

Contributions in respect of an earlier period

APRA has revised its guidance to state that the provisions in the SIS Regulations allowing a trustee to accept a contribution if it is satisfied that it relates to a previous period in which the fund may have accepted the contribution.  It says that these provisions be used by the trustee to accept a late contribution only if:

  • it is an employer contribution that relates to an earlier employment period; or
  • it was erroneously allocated to another member and the late contribution is a correction of the mistake.

Clearing house services

APRA provides additional guidance about the need to document the risks of trustees operating a clearing house.

Where the clearing house is provided by an external service provider, trustees need to consider whether the outsourcing standard would apply:

  • APRA states that where the clearing house arrangement is established through a relationship between the employer and the clearing house, this is unlikely to be classified as outsourcing by the trustee.
  • Where the clearing house service is provided externally, APRA expects the risks arising from this activity to be considered and documented in the trustee’s Risk Management Statement.

Payment standards (SPG 280)

SPG 280 replaces Superannuation Circular No. I.C.2 Payment Standards for Regulated Superannuation Funds, Superannuation Circular No. I.C.3 Payment Standards for Approved Deposit Funds, and additional advice, generally in the form of letters to industry, on illegal early release and portability relief applications (made under SIS Regulation 6.37).


APRA has modified the guidance about the measures trustees should take to deal with liquidity and cashflow issues in relation to the payment of pensions.  Rather than expressly recommending that trustees invest at least three years’ worth of minimum pension payments in highly liquid assets, APRA now recommends that “sufficient assets are set aside to ensure payment of the pension for a minimum period”.

In more a difficult economic environment, it expects trustees to set aside sufficient assets to pay pensions for a longer period, such as three years, and for “the appropriate amount of assets to support the pension to always be invested in (defined) highly liquid investments to ensure adequate cashflow at all times”.

Death benefit payments

APRA states that it is good practice for trustees to have policies and procedures dealing with the payment of death benefits that ensure compliance with all requirements and also take into account practical concerns and the sensitive nature of such payments, and to consider issues of equity to beneficiaries when determining payments.

Unit pricing errors

APRA has modified its guidance in relation to how trustees should deal with unit pricing errors that result in a reduction in member entitlements.  It still provides that the compensation should be transferred to the former member’s current superannuation account.

Where the trustee cannot find a fund, the guidance now provides that where the shortfall is less than $200 and the former member had terminated gainful employment, or was a lost member who is now found, the trustee may pay the amount to the former member in cash.  If a condition of release has not been met, the trustee may make an application to APRA for relief from the payment standards.


​Who does this affect?

Trustees of superannuation funds.

​What do you need to do?

Consider the guidance and make business changes as required.



 Key contact(s)

  • John EdsteinJohn Edstein
    T: +61 2 9296 2000
    M: +61 419 219 733

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