New Funds Now in Limbo

To combat the problem of illegal early release the ATO has created a new designation for its Super Fund Look Up register: Registered - status not determined.

This new designation will apply to all newly established SMSFs. This new status will typically be updated only when a super fund lodges its first annual return and the fund is declared by the tax office as complying or non-complying with the super laws.

Does this mean that superannuation money cannot be transferred into a "registered - status not determined" super fund?

Each large super fund trustee will make up their own mind how they will react, but it is reasonable to assume that some trustees will be reluctant, and may even refuse, to transfer money to SMSFs that have this new designation. In a letter to the trustees they regulate, APRA told them to perform additional checks on super funds with this new status.

We have heard of one case where a large super fund was using this new designation to slow down the transfer of money into a new SMSF.

This new registration process is the first of two changes the ATO is making to the set-up of new super funds.  The second phase involves the ATO changing how small super funds are registered with it.

If these new rules see less mischief taking place with small super funds, then these changes are worthwhile.  However if they permanently stop or delay many legitimate transfers into new SMSFs, then the ATO will have cracked the walnut with a sledgehammer and provided a free-kick to large public-offer funds.