From 1 July 2014, employers with 20 or more employees cannot make superannuation contributions to employees’ super funds by cheque under a new law. The law also requires employers with less than 20 employees to comply after 01 July 2015.
However, the law does not apply if the employer is related to your SMSF. As per the ATO, a related party includes all members, relative of each member, business partners, etc.
The purpose of the law is to ensure a consistent and reliable way of paying superannuation electronically. It can help standardise the process of making superannuation payments and improve the administration of superannuation accounts.
How does it work?
- Employers are required to make superannuation for their employees via brand new payment systems, which will be provided by most of the popular accounting software. Super data will be recorded and updated electronically and automatically.
- SMSFs which receive superannuation contributions from unrelated employers will need to provide the employers with the following:
• An electronic service address (referring to the list of provider from ATO: https://www.ato.gov.au/Super/SuperStream/In-detail/Contributions/SMSF-messaging-service-providers/)
• Australian Business Number
• Bank account details
3. When employers process payrolls every week/fortnight, the superannuation payments will be made directly to SMSFs’ bank accounts automatically. The relevant superannuation data will be sent to the electronic service address, which will advise the SMSFs the amount and the member’s details for which the superannuation is made.
All the above details should be provided to the unrelated employers as soon as possible to make sure those employers comply with the regulation. Any non-compliance with the law will draw the ATO penalty to both of SMSFs and employers. Therefore, trustees of SMSFs should prepare early to avoid any delays of superannuation payments and relevant penalty.
Disclaimer: Campbell McCart is an SMSF specialist and principal auditor of the SMSF Super Auditors. His advice is general in nature and you should seek advice that relates to your specific circumstances before making any decisions.