Member contributions statement protocol

Introduction

This protocol has been developed to help super providers and suppliers lodge correct and timely information for all members with us using the member contributions statement (MCS). If you are reporting for less than 20 members and so are permitted to use paper MCS forms, the MCS Protocol is relevant for you too.

The material deals with the key issues of:

  • collecting contributions information and other member information
  • classifying contribution types
  • reporting contributions
  • reporting account attributes and other member information.

The focus of the protocolis current reporting issues. It reflects changes made from the 2012–13 financial year to expand reporting to all members holding an interest in the fund during the reporting period. It also covers issues arising from the additional member information and account attributes you are required to report for 2012–13 and later years.

/ You will need to refer to the MCS electronic reporting specification when reading this document. The specification is the approved form and this protocol only supplements the requirements set out there.
/ This protocol does not cover:
  • contributions made before 1July2007
  • reporting by selfmanaged super funds.

Guiding principles

To ensure you comply with your obligations, there are three guiding principles that should always be followed:

1. Implement account-keeping and control systems that collect good member data.

2. Understand and actively pursue your legal obligations.

3. Actively manage change.

1. Implement account keeping and control systems that collect good member contributions data

As part of good corporate governance, the accounting and control systems you have in place should be designed to:

  • ensure you are complying with your legal obligation to report member information in the approved form under Division 390 of the Taxation Administration Act 1953
  • meet your obligations under the Superannuation Industry (Supervision) Act 1993 (SISA)
  • meet your fund's income tax obligations.

The collection and treatment of good data at its source is essential for correct and timely reporting. This is the case irrespective of whether you lodge an MCS or whether a supplier lodges an MCS on your behalf.

2. Understand and actively pursue your legal obligations

Tax and super laws impose obligations on you to regulate and administer your fund in particular ways. You do not have discretion to act in a way that is contrary to a legislative requirement or reporting obligation, even if this would be in the interests of your members.

/ Do not allow directions given or requests made by members, employers and other parties to prevent you from complying with the law.

You should make sure that your members and their employers are aware of your fund’s policy in this regard before any issues arise.

Penalties for incorrect MCS reporting

You need to be aware of the penalties that can apply if you report incorrectly. The Taxation Administration Act 1953 prescribes a uniform administrative and criminal penalty regime for non-compliance, and this regime applies to MCS approved form reporting.

An administrative failure to lodge penalty may apply if a provider fails to lodge an MCS. For example, an electronic MCS file that reports many members but omits a report for a single member is a failure to lodge an MCS for that member and therefore may attract a penalty.

Other administrative penalties may apply for lodging an MCS that contains a statement that is false or misleading in a material particular. A penalty will not apply when you can demonstrate you took reasonable care.

/ For more information about these penalties, including examples relevant to your lodgment of the MCS refer toSuperannuation and false or misleading statements which do not result in a shortfall amount andLaw AdministrationPractice StatementPS LA 2012/4.

3. Actively manage change

The current environment is one of ongoing change and reform that is likely to impact the future MCS. We are committed to working with the super industry to actively manageany changesby telling you what we know as soon as we can. This should assist your implementation planning even before we canannounce full and final details.

Changes to contributions reporting following a rollover

At the request of industry, we have changed the way contributions are reported when a rollover occurs. From 1July 2013, all contributions received by a super fund during a financial year must be reported to us by that fund – not by another fund – where the contributions are rolled over to another fund.This affects the contributions reported in the 2013–14 and subsequent years MCS.

The 2013–14 MCS (and later years) will only report contributions received directly by the super fund. You will simply need to report all contributions you have received on the MCS for all accounts held during the year, including those that have closed during the year. This change applies to the 2013–14 MCS for MCS due on or before 31October 2014.

These changes have only been made possible following the introduction of expanded reporting for all members and changes being introduced from 1July 2013 for the rollover data standard.To implement this change,we have published a new rollover benefits statement (RBS) for use from 1July 2013. There is no current year contributions information included on the new RBS. The new MCS reporting specification to be published for 2013–14 will reflect the change to reporting contributions that are rolled over and remove references to the RBS.

/ For more information, refer to the Rollover benefits statement and instructions for transactions on or after 1 July 2013.

Other changes for 2013-14 MCS

  • Use of unique superannuation identifier(USI):

Allows identification ofa fund, or a productor other sub-division withina fund

All member accounts must be allocated a USI, at least for MCS reporting

We expect ATO payments to be made to the product level from December 2014and so a USI is essential in 2013-14 reporting

  • Changes introduced for the trans-Tasman portability law require minor instructional changes to reflect the legislation
  • The field Notional employer contributionswill be renamed Defined benefit contributions (see Defined benefit contributions), withother changes to support this measure including:

special requirements for CPFs will be simplified (see Special rules for CPFs)

update requirements at the Account phase field to reflect the legislative requirements regardingcrystallisation of benefits in defined benefit funds

Longer term change for MCS

Super funds will report member information to us using the Data Standards. Information currently collected on separate statements (MCS, lost members statement (LMS) and unclaimed super money (USM) statements) may become a combined‘fund member report’ after December 2016.

/ This information is the best available at the time this protocol was published and is subject to change.
For more current information, subscribe to our alerting services and check Super reform – a guide for APRA funds.

Accepting and reporting contributions

Collecting contributions and other member information

You need to assess whethertransactions or events affecting a member are contributionsand record them for the appropriate income year. You also need to identify all accounts that have an interest in the fund that you will lodge an MCS for and what account information you need to provide.

Your accounting and reporting systems and your procedures should:

  • capture all transactions and other events affecting members’ interests in the fund
  • identify all transactions and events that meet the definition of contributions
  • identify transactions and events that will affect the account attributes and other information that you will be required to report in an MCS for each of your members.

The definition of contribution is broad and includes a consideration of whether a transaction or event adds to the capital of the fund. The reporting obligation is also broad and will generally require every fund to provide a statement for every member every year.

Report accurately all the information you hold at the time

You must accurately report the information you hold for a member at the time you prepare their MCS for lodgment. All of the information we request on the MCS is used by us to administer the government's super and retirement income policies. All of it isimportant and is governed by the same legal obligations.

/ Funds found to be in breach of, or acting in a manner that appears contrary to, the legislation, regulations or our published interpretation of the legislation risk penalties being imposed on them.

All fields are mandatory

TheMCS electronic reporting specificationapplies atechnical distinction between mandatory, optional and conditional fields that makes sense to software developers but may be confusing for others. All fields are mandatory in the sense that all are of equal importance and, to satisfy your legal obligation,you must alwayscomplete all of themwhenyou have theinformation asked for in your possession.

The term 'optional',as it is used in the specification, only refers to the fact that the MCS can be successfully lodged whenyou do not have the information asked for in a certain field and so are forced to leave it blank.However, if youare holding the information for anoptional field, you mustreport that information.

For example, the TFN field is optional and an MCS can be successfully lodged with a blank TFN field. However, if you actually have a member's valid TFN but do not include it at this field,you are not fulfilling your obligation to report in the approved form. We may be unable to identify the member and will assume that the fund has applied the no-TFN rules (such as extra tax on employer contributions and refusing to accept personal contributions).

/ The optional statusof a fielddoes not mean its use is not mandatory. It can be blank-filled or zero-filledonly when you do not actually possess the requested information.
/ You may be making a false or misleading statement if you fail to report information you hold at an optional or conditional field. Penalties may apply.

The members to be reported

The obligation to provide an MCS to us about a member previously arose only if contributions had been received for that member during the report period. For the 2012–13 financial year and later reporting periods,your obligation has been expanded so that you must now provide a statement for every member who held an interest in the fund at any time during the financial year.

Although we have retained the title of the form, the MCS is no longer only a statement about contributions– it's also a statement about member information and account attributes, such as:

  • the balance of an account
  • the phase of the account
  • whether rollovers and ATO payments are accepted.

For example, you will lodge an MCS each year for members who:

  • had an account at the beginning of the year but closed it before 30June
  • are lost members or have dormant or inactive accounts into which no contributions are made
  • are being paid a pension or have satisfied a condition of release and are no longer making contributions
  • have no account with the fund (or a zero balance account) but have some other interest such as an insurance interest or a defined benefit interest.

This expansion of the reporting obligation has important impacts for your reporting systems. The triggers for generation of an MCS will no longer be dependent upon contributions but will instead focus on the presence or absence of a super interest.

Funds and schemes that need to lodge an MCS

Another important impact of expanded reporting is that all super providers without exception will need to lodge MCS each year for all of their members. Previously, some providers had no contributions to report and thus may never have needed to develop the systems and processes required to lodge an MCS. Entities that may have been in this position but now must lodge include:

  • small funds that were closed to further contributions and new members
  • eligible rollover funds where contributions weren't accepted
  • certain defined benefit public sector schemes
  • constitutionally protected funds(CPFs) only in receipt of employer contributions.

The definition of a superannuation provider includes the trustee of a superannuation fund and the provider of a retirement savings account. Superannuation fund is defined very broadly and includes all public sector super schemes (federal, state and local government), regardless of whether they are regulated by the Australian Prudential Regulation Authority (APRA) or whether they are exempt from regulation and regardless of whether they are CPFs.

Holding an interest in the fund

You will need to decide who holds an interest in the fund during a financial year and ensure your reporting correctly deals with any multiple interests.

Interest in a fund refers to a distinct claim of any kind against a fund, whether it be proprietary in character or not.Cash held in an account for the benefit of a member or investments held on their behalf clearly indicate a super interest but so will less easily quantifiable entitlements such as life or disability insurancepolicies in the name of the member or entitlement to defined benefits.

For more information, seeLodge an MCS for anyone with a 'superannuation interest' during a financial year.

The meaning of contributions

The word ‘contribution’ is not defined in the law and so it has its ordinary meaning. This ordinary meaning is discussed in taxation rulingTR 2010/1Income tax: superannuation contributions.

The character of an amount coming intoyour hands as a receiving super provider will determine if it is a contribution. Generally, any amount that increases the capital of your fund is a contribution. However, if an amount is derived or received as income, profit or gain from an investment, or realisation of an investment from the existing capital of your fund, it is not a contribution.

Contributions include:

  • rolling over a super benefit from another super fund
  • transferring an existing asset (an in specie contribution) to the fund
  • creating contractual rights (also an in specie contribution) in the fund
  • increasing the value of an existing asset held by the fund
  • paying an amount to a third party for the benefit of the fund
  • forgiving a debt owed by the fund
  • shifting value to an asset owned by the fund.

You need to keep records of any of these events, including the date the fund received the contribution, the type of contribution it was and the amount of the contribution.

Insurance premiums, paid by members or their employers, are contributions

Insurance premiums paid to a super provider are contributions. If they are paid by the member, they are personal contributed amounts. If they are paid by the member’s employer, whether direct to the insurer from which the fund has purchased a policy or to the provider, they are employer contributed amounts. This is true in all circumstances, including for risk-only or insurance-only policies where the super benefit provided is only cover for death, disability or sickness and contributions are not accumulated in an account for the benefit of the member.

/ For more information about this and other types of contributions, refer to taxation ruling TR 2010/1Income tax: superannuation contributions.

If your liabilities, such as insurance premiums, are paid for you by employers and other third parties, you have an obligation to record and report them as contributions attributable to members. You should make sure thatyou are fulfilling this obligation so you are not exposed to potential administrative penaltiesor prosecution.

Your members may be unaware that contributions of this nature are being made for them and may inadvertently exceed the contributions caps. Consider bringing this issue to the attention of your members and associated employers so that they are able to manage their contributions affairs in an informed way.

The amount of a contribution

The amount of a contribution is the gross amount originally contributed without deductions of tax, fees or other amounts. You may need to calculate the gross value in some cases – for example, in relation to in speciecontributions.

/ For more information about the amount of a contribution, refer to taxation ruling TR 2010/1Income tax: superannuation contributions.

You must always report on the MCS the full amount of the contribution that was originally made for the member. When reporting contributions on the MCS, you must ensure that your reporting procedures do not reduce the actual amount of a contribution by any of the following:

  • fees, taxes and investment losses that may reduce an account balance below what was originally contributed
  • contributions rolled over, transferred or allotted to a spouse under a contributions splitting arrangement
  • super benefits paid to the member
  • contributions paid out to the member under the hardship provisions
  • amounts released to the member or to us under an excess contributions tax release authority.

You don't report the contribution originally made if it has been returned to the contributor in restitution for a mistake. However, you do report contributions that have been returned to the member or contributor if the special circumstances of restitution for a mistake do not apply.

For more information about these special circumstances, see Amendments.

/ A fund might be required to return contributions to the contributor under subregulation 7.04(4) of the Superannuation Industry (Supervision) Regulations 1994 (SISR).

The income year for which a contribution is reported

You need to know the date that each contribution was made to you as you must report a contribution in the MCS for the particular financial year in which the contribution was legally made. You must do this regardless of the intentions of either the member or their employer. A contribution is generally regarded as made when it is received by you, regardless of when a member or employer tells you it was made.