Transferring from an SMSF to an Industry Fund Explained

There is a lot to consider when transferring or rolling over your super from your Self-Managed Superannuation Fund (SMSF) to an Industry Fund.

Rollovers or transfers must be completed electronically via SuperStream.  There are some minor exceptions being:

• in-specie rollovers – Industry funds do not typically accept in-specie rollovers
• rollovers from a foreign super fund
• rollovers from a non-complying fund
• a family law split

The above rollovers are managed using a manual rollover benefits statement (RBS).

When can you transfer super out of an SMSF?

A member can rollover their superannuation from their SMSF to an Industry Fund at any time. They do not require a condition of release because their super balance stays within the super system.

Transferring superannuation via SuperStream

An SMSF (transferring fund) must have an electronic service address (ESA) to process rollovers to an Industry Fund (the receiving fund) and an Australian Business Number (ABN), which your fund would already possess. At SMSF Australia, we provide an ESA when you establish a new SMSF with us; it is included in the setup fee or in the annual administration fees linked to the Class Super platform we use to manage your fund.

What is an Electronic Service Address (ESA)?

An ESA is a messaging service.  Superannuation money is transferred via the bank’s electronic funds transfer (EFT) system, but an ESA allows messages to verify the SMSF and provide details about the Industry Fund, as well as verify details the ATO hold in relation to the member, to ensure the funds are transferred accurately and promptly to the correct fund for the right member. An SMSF can only have one ESA registered with the ATO.

Check details align with ATO data and the Industry Fund

Before initiating a rollover, verify that the fund’s data and the SMSF member’s personal details match the ATO records. This is especially important if a member has married or divorced during the year and changed their name! Checks also needs to be made in case the fund’s bank account differs from the one recorded by the ATO, if the member has changed address and it is not recorded in the ATO records, or if an incorrect tax file number is recorded in the fund’s records as any errors will cause the rollover to fail.

SMSF messaging providers verify the tax file number of SMSF members and other details through integration with the ATO service “SMSFmemberTICK”. A message is sent with either a valid or invalid response. An invalid response should be followed up with the member to update the ATO or SMSF records as needed.

The integration of the Fund Validation Service (FVS) with SMSF messaging providers’ web services enables them to access the Industry Fund’s details. Information such as the fund’s unique superannuation identifier (USI), bank details, contact information, and ESA are stored on a register that can be accessed through the FVS.

What is the process for rolling over from an SMSF to an Industry Fund?

If you engage a professional SMSF Accountant, they will handle all the steps for you and you will have to do very little personally in order to complete the process. But the information below is designed for those clients still keen to understand what is happening behind the scenes.

1. A member initiates the rollover in a number of different ways, which can include:

• Making a request for a member’s entire super balance to be transferred to an Industry Fund by using a member’s myGov account – by submitting an electronic portability form (EPF)
• A partial or full rollover can be started by your SMSF or an Industry Fund using an Initiate Rollover Request (IRR) via SuperStream, after receiving:
  • A written rollover request made by the member to their SMSF
  • A request made directly to their Industry Fund, typically online– Proof of identity (POI) documents or SMSF bank verification may be required by the Industry Fund before it sends the request to your SMSF

Hint – the SMSF member’s Industry Fund membership number must be included in the rollover request.

2. The SMSF Trustee initiates the transfer request

• • Prior to initiating the rollover, ensure the fund has sufficient cash flow to make the rollover.
  • If required Increase the fund’s daily cash transaction limit to enable the amount to be rolled over in one payment or multiple rollovers equal to the total rollover payment, where the payment cannot be made as one single amount.
  • The member’s tax file number (TFN) and other member details are verified via the fund’s SMSF messaging provider.
  • The Industry Fund’s details are provided by the SMSF messaging provider.
  • The administrator actions the rollover request by sending a data message using an IRR to the Industry Fund.
  • Each separate rollover must include its own unique identifier, known as a payment reference number (PRN),
  • The PRN is provided by the SMSF messaging provider once the rollover request has been actioned.

3. The SMSF trustee transfers the funds

• • The SMSF trustee must transfer the funds via EFT to the Industry Fund within 3 business days of the rollover request being made. However, if any information is missing, the timeframe is extended to no later than 3 business days after all required information is received.
  • The payment must match the rollover message, and the EFT description must include the relevant PRN.
  • The Industry Fund must confirm receipt of the payment within 3 business days.
  • The SMSF trustee is required to send a copy of the rollover benefit statement to the member within 30 days of the rollover being made.

How is the transfer treated if the payment is made directly to the Industry Fund?

A payment made by an SMSF directly to the Industry Fund, without using SuperStream, is considered a contribution to the receiving fund. Depending on the Industry Fund’s rules, it may be classified as a non-concessional contribution, which could exceed the member’s non-concessional contributions caps. The payment from the SMSF may breach various super rules and regulations, especially if the member did not have a condition of release. The ATO could see it as illegal early access to super and might include it as assessable income in the member’s personal tax return.

Transferring member balances when winding up an SMSF

Rolling over super to an Industry Fund when winding up an SMSF is the same rollover process, but there are many other considerations, which include:

• liquidating fund assets
• paying out benefits where members satisfy a condition of release
• insurance premiums being paid from the SMSF
• calculate member balances
• ensuring pension payments are made prior to wind-up
• prepare the final SMSF financial statements and annual return

Other considerations when partially transferring an SMSF member’s super balance

• Check the SMSF’s compliance status by using Super Fund Lookup to confirm it is either complying or registered. If a fund’s details are removed due to late lodgement or unresolved tax lodgements, the SMSF will be unable to access SuperStream.
• Loss of insurance cover – it is crucial to consider the impact of insurance premiums being paid through your SMSF; you may need to retain a sufficient balance to continue the regular insurance payments.
• S290 documents ensure the documentation to obtain a personal tax deduction for contributions made to the fund is processed and acknowledged by the trustee before the rollover is actioned or risk the tax deduction being partly or fully denied.
• Updating the market valuation of fund assets and financial statements – to calculate the SMSF member’s balance and preservation components, all fund assets should be valued at market value, so the financial statements can be updated and earnings fairly allocated to members’ balances before executing the rollover.
• Possible liquidation of fund assets to fund the rollover and consider the capital gains that may result from the disposal of fund assets.
• Member exiting the fund by rolling all of their super balance into an Industry Fund, restructure the trustees, notify the ATO of the change in members and trustees or directors of the corporate trustee.
• Pension payments – ensure there is sufficient super balance to pay the pension minimum before 30 June.