As a superannuation fund member, you can transfer some or all of your current superannuation between super funds, including self-managed superannuation funds (SMSFs). This process is known as a rollover and must be processed electronically using two components:
- a data message and
- a separate payment transfer
Both of these are legal requirements; however, there are some exceptions to this rule.
To ensure a successful rollover, a member must complete several steps. Once all the required information is provided, the trustees must complete the rollover within three business days. Additionally, systems must be in place to act on the requests; failure to meet this requirement could result in your fund receiving a compliance breach.
Moving your money from an APRA-regulated fund to an SMSF.
1. Request a rollover. Before doing so, it is essential to ensure that your details with the Australian Prudential Regulation Authority (APRA) n-regulated fund and your SMSF are identical. Any mismatch can delay or prevent processing. Discuss with your APRA-regulated fund what documents you may need to provide, such as a marriage certificate or your SMSF bank account details.
There are three ways to request a rollover:
- through the APRA-regulated fund,
- through ATO online services for whole balance transfers only or by
- issuing a rollover initiation request to the APRA-regulated fund through your SMSF messaging provider.
It is important to note that there will be a delay or rejection if you do not provide all the required information. Additionally, suppose the APRA-regulated fund suspects any illegal activity. In that case, it will report to the Australian Transaction Reports and Analysis Centre (AUSTRAC) and relevant law enforcement agencies.
2. The APRA-regulated fund undertakes mandatory verification checks to ensure that the fund and member details match the records held by them and the ATO. To protect against potential fraud, the ATO will send the member emails or text alerts when there is a rollover request. If the member is unaware of the request, the member should contact the transferring fund immediately to stop it.
3. The member confirms that your SMSF has received the rollover. The APRA-regulated fund will generally process and pay the rollover to the member’s SMSF bank account within three business days of receiving all the required information. They will notify the members SMSF when this occurs. However, if the underlying assets are illiquid, the product is a closed or a defined benefit product, or the pension account is a type other than an account-based pension, they may take longer to process the request.
When the SMSF receives the payment and associated data, the member should check that the payment reference number (PRN) in the data message matches the amount provided by the PRN. Then, the member must confirm receipt of the rollover by sending an outcome response message to the APRA-regulated fund within three business days.
Background
Lee Braz had planned to transfer his benefits from his superannuation fund, InTrust Super Fund (“the Fund”), to a self-managed superannuation fund. However, the accounting firm he thought he was engaging, PS Kitt & Co, was a malicious actor, referred to as “the scammer” in the Australian Financial Complaints Authority (AFCA) determination, who assisted him in setting up the SMSF. Later, Mr Peter Kitt, the owner of PW Kitt & Co, informed Mr Braz that con artists had hijacked his name, business, and reputation.
Mr Braz completed a form labelled “Set up a new SMSF” with the PW Kitt & Co logo. The document was titled “Self-Managed Superannuation Fund.” The scammer used the name “PW Kitt & Co Pty Ltd,” which differed from PW Kitt & Co. Mr Braz, unaware of the difference at the time, provided his date of birth, tax file number, and address and signed the form, including a photocopy of his passport. The passport contained a signature, and the information and signatures were legitimate.
On 1 July 2020, Mr Braz gave the completed form to the scammer dated 19 June 2020. On 27 July 2020, the scammer lodged a Benefit Payment Application form with InTrust Super without Mr Braz’s knowledge or approval. On 28 July 2020, the total balance was transferred to The Trustee for Lee Braz Family Super Fund for $178,408.89. The transfer was to the bank account nominated on the fraudulent form.
Mr Braz requested that the Fund refund his benefits, but the Fund denied his request.
AFCA complaint
AFCA received a complaint from Mr Braz regarding the Fund’s decision. AFCA determined that the Fund’s decision was fair and reasonable concerning Mr Braz as it fulfilled its obligations to transfer his benefits and complied with all process checks and administrative controls. AFCA concluded that the trustee’s decision not to provide compensation was fair and reasonable based on the following:
- (a) InTrust Super fulfilled its transfer obligations and
- (b) InTrust Super complied with all process checks and administrative controls that were in place at the time.
The appeal
In Braz v Host-Plus Pty Ltd [2023] FCA 1454 Mr Braz filed an appeal with the Federal Court of Australia on a question of law. The Court observed that clause 6.33(1) of the Superannuation Industry (Supervision) Regulation 1994 allows a member of a regulated superannuation fund to make a written request to transfer their withdrawal benefit, either in part or in full, to a receiving fund.
Reg 6.28, that deals with “Rollover—regulated superannuation funds and approved deposit funds”, provides:
(1) Except where it is otherwise provided by the Act, the Corporations Act 2001, the Corporations Regulations 2001 or these regulations, a member’s benefits in a regulated superannuation fund … must not be rolled over from the Fund unless:
(a) the member has given to the trustee the member’s consent to the rollover;
The issue at hand is whether a forged request made by a third party can be considered a request made by a member, given that a member does not sign it.
The decision
The AFCA made an error in interpreting the application of reg 6.33E on 26 May 2022, specifically when it concluded that compliance with reg 6.33E indicated that the trustee’s decision not to provide confirmation was reasonable and fair.
The AFCA also neglected to consider the impact of the lack of consent, including the consequences of reg 6.33. It did not consider whether the member had requested in writing, as outlined in reg 6.33(1), that the whole of their withdrawal benefit be rolled over and whether the member had consented to such a rollover.
The Federal Court decided to set aside The AFCA determination. Under s 1057(4) of the Corporations Act 2001 (Cth) the matter will be remitted to the Australian Financial Complaints Authority for re-determination based on the law.