Member contributions statement protocol

IntroductionThis 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 protocol is 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 1 July 2007

reporting by self-managed super funds.

Guiding principlesTo 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 obligationsTax 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 reportingYou 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 to Superannuation and false or misleading statements which do not result in a shortfall amount and Law Administration Practice Statement PS LA 2012/4.

3. Actively manage changeThe 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 manage any changes by telling you what we know as soon as we can. This should assist your implementation planning even before we can announce full and final details.

Changes to contributions reporting following a rolloverAt the request of industry, we have changed the way contributions are reported when a rollover occurs. From 1 July 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 31 October 2014.

These changes have only been made possible following the introduction of expanded reporting for all members and changes being introduced from 1 July 2013 for the rollover data standard. To implement this change, we have published a new rollover benefits statement (RBS) for use from 1 July 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 of a fund, or a product or other sub-division within a 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 2014 and 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 contributions will be renamed Defined benefit contributions (see Defined benefit contributions), with other 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 regarding crystallisation of benefits in defined benefit funds

Longer term change for MCSSuper 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 informationYou need to assess whether transactions or events affecting a member are contributions and 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 is important 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

The MCS electronic reporting specification applies a technical 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 always complete all of them when you have the information 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 when you do not have the information asked for in a certain field and so are forced to leave it blank. However, if you are holding the information for an optional field, you must report 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 status of a field does not mean its use is not mandatory. It can be blank-filled or zero-filled only 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 reportedThe 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 30 June

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 MCSAnother 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 fundYou 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 insurance policies in the name of the member or entitlement to defined benefits.

For more information, see Lodge 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 ruling TR 2010/1 Income tax: superannuation contributions.

The character of an amount coming into your 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 contributionsInsurance 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 2010/1 Income 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 that you are fulfilling this obligation so you are not exposed to potential administrative penalties or 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 contributionThe 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 specie contributions.

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

For more information on when different types of contributions are considered to be made, refer to taxation ruling TR 2010/1 Income tax: superannuation contributions.

Contributions received by a fund (made) before 30 June of a financial year but not allocated to the member’s account until the next financial year belong to the year that they were made, not the year they were allocated. These contributions are reported for the earlier year. Conversely, where a member attempts to make a contribution on 30 June but it is not received by the fund until July, the contribution is considered made in the later year, on the day it was received by the fund.

Example

As part of a salary sacrifice arrangement, Austin's employer made a contribution for him of $10,000 by electronic funds transfer on 28 June 2009. The funds were received into his super fund's bank account on the same date. The contribution was not allocated to an account for the member until 7 July 2009. However, the contribution was correctly recorded as being made on 28 June 2009 and was reported as an employer contribution for Austin in a 2008–09 MCS.

Even if, for some other legal or practical purpose, the contribution is recognised in a different year, for member contribution reporting purposes the contribution is always attributable to the year it was in fact made (received by the fund).

The period in which a contribution was intended to be made by the member or an employer does not affect when it was actually made. In this regard, a super fund has no discretion in how it must report the contribution.

Example

Melanie had arranged for her employer, Wild Villas, to make regular personal contributions during the year totalling $1,000 to allow her to take advantage of the maximum super co-contribution. They were made by after-tax payroll deductions paid monthly to her super fund along with her before-tax employer contributions. Melanie's last monthly pay for the year was on 23 June 2009 and for that pay the Wild Villas sent $83 (after-tax) and $2,000 (before-tax) to the fund. Her payments were part of a large cheque for all its employees dated 28 June 2009 and posted the next day. The cheque was received by the super fund on 3 July 2009.

The fund would report in an MCS for Melanie that the $2,000 was contributed in the 2009–10 financial year. Wild Villas had satisfied its super guarantee obligations for Melanie for the 2008–09 financial year as the contribution was made by 28 July 2009.

However, as Melanie's personal contribution (the $83) was made in the 2009–10 financial year, the fund correctly excluded it from the 2008–09 MCS lodged for her. She asked the fund to re-report and treat the contribution as being made in the year it was intended for, but the fund correctly refused to do so, referring Melanie to the ATO's

ruling TR 2010/1. She was unfortunately not entitled to the full co-contribution. However, the late contribution did count towards her co-contributions entitlement for the 2009–10 financial year.

Acceptance of contributionsYou may only accept contributions in accordance with regulation 7.04 of the SISR. Circumstances in which you cannot accept certain contributions include where a:

member is over a certain age

member has not quoted their tax file number (TFN) to you

single contribution exceeds a member's fund-capped contribution limit.

Contributions that you should not have acceptedIf a particular contribution is inconsistent with regulation 7.04 of the SISR, you must not accept it. If you do accept the contribution, you are required to return it within 30 days of becoming aware that you should not have accepted it. However, any failure to comply with the time limit does not affect your legal obligation to return the contributions.

The 30-day limit is a period of grace for you to remove the contributions from the super system without breaching the preservation or contribution rules. Once the time limit expires, you will not be able to take advantage of the defence provided by subregulation 7.04(5) and so will be in breach of the rules.

Returning contributions under regulation 7.04 may have implications for contributions reporting.

For more information about returning contributions after 30 days, refer to ATO ID 2009/29 Superannuation Contributions: return of contribution by self managed superannuation fund – after 30 day time limit. This gives our view about funds we regulate. APRA has the same view about funds they regulate.

Release authority and contributionsActioning a release authority must have no impact on the contributions you report in an MCS (or on any contributions tax you applied to the member account when the contributions were made).

We, or your member, may give you a release authority when either your member:

must pay excess contributions tax

has accepted a once-only offer from us to refund excess concessional contributions

This must have no affect on your MCS reporting for that member (or on whether they were assessable contributions for the purposes of the fund's income tax liability). When you receive a valid release authority the member has satisfied a condition of release. Although from the member's perspective it will appear otherwise, you are authorised to release a benefit but not to refund contributions. The contributions that gave rise to actual or potential liability to excess contributions tax are past transactions that are unchanged by application of the release authority.

You must ensure that your systems do not trigger an MCS amendment when you action a release authority.

Classifying contributionsWhen you receive a contribution, you must determine what type of contribution it is so you can put it at the appropriate field in the MCS. The fields are:

Employer contributed amount

Personal contributed amount

Capital gains tax cap election amounts

Personal injury election amount

Spouse and child contributions amount

Other family and friend contributions amount

Assessable foreign fund amounts

Non-assessable foreign fund amounts , including KiwiSaver tax-free amounts

Contributions made to a previously non-complying fund

All contributions received for the current year .

In addition, you need to consider whether you need to report notional amounts in circumstances where, according to the ordinary meaning, no contribution may in fact have been received by the fund. The fields for these notional amounts are:

Notional taxed contributions

Defined benefit contributions for division 293 tax

Transfers from reserves amounts (assessable and non-assessable allocations from reserves).

The appropriate field for each contribution depends on where the contribution has come from, what information is provided by the contributor when they make it and what decisions you make about how it will be treated in your fund. When you accept a contribution, you

need to collect information that will help you to correctly determine what type of amount it is. Generally, you should be able to answer the following questions for each contribution:

Who is the contribution for?

Who made the contribution?

What is the contributor's relationship with the member for whom the contribution was made (that is, are they the member themselves, the member's employer, the member's spouse or another third party – such as other family and friends)?

What was the purpose of the contribution?

Did the contributor provide a valid notice of election to treat the contribution in a particular way?

Use the information you collect, the MCS electronic reporting specifications and this protocol to help you correctly classify and report contributions. An explanation of each field, which adds to and supports the explanations given in the reporting specification, is provided.

We use the contributions information you and other funds provide and deduction information from your members’ income tax returns to determine which contributions are:

eligible personal contributions so we can determine super co-contribution entitlement

concessional contributions so we can determine low income super contribution (LISC) entitlement for the 2013-14 financial year, and assess member tax liabilities in relation to the concessional contributions cap and division 293.

non-concessional contributions so we can assess member tax liabilities in relation to both division 293 and the non-concessional contributions cap.

Employer contributed amountGenerally, super contributions made by your member’s employer are included at the field Employer contributed amount. However, this is not always the case, and you will need to implement systems and processes to distinguish between:

employer contributions made by an employer

personal contributions made by an employer on behalf of their employee.

Not only do you need to consider this distinction, but you may also have a duty to ensure this distinction is understood and properly applied by your members and by their employers when providing information to you.

For example, you may need to work with an employer to correct information where the employer is incorrectly characterising members’ salary sacrifice contributions as personal contributions.

Contributions that are employer contributed amountsEmployer contributed amounts are contributions made by an employer for an employee, usually to satisfy a contractual or legal obligation – for example:

to meet super guarantee requirements

under obligations imposed by industrial agreements, awards, trust deeds or governing rules

under a Commonwealth, state or territory law governing the super entitlements of public sector employees

as a result of a salary sacrifice arrangement, where the member agrees to forgo part of their before-tax salary or wage in return for their employer providing a super benefit of a similar value

to fund super retirement benefits for the member as part of a remuneration package that may exceed the minimum legal requirements

to pay for fund costs such as insurance premiums in respect of the member.

Example: Insurance premiums paid by employer

Chef Pty Ltd sponsors a super fund for its employees called Chef Super Fund. Colin is a senior employee of the company and a member of the super fund. As he is over 50, he is eligible for the transitional cap of $50,000 applicable to the years 2007–08 to 2011–12. The trustees of the fund insure the lives of the fund’s members, including Colin’s, according to usual industry practice, and the trustees are the policy holders. The insurance is to fund super benefits payable upon Colin’s death or permanent incapacity.

The company as sponsor has agreed to pay the fund’s annual life insurance premiums and does so on 1 June 2010. When Chef Super Fund lodges its MCS for the 2009–10 financial year, it adds the insurance premium of $1,200 paid for Colin to the other employer contributions of $50,000 Chef Pty Ltd made for Colin. It therefore reports $51,200 at the field Employer contributed amount.

Chef Super Fund did not make Colin aware of the effect of these premiums on his contributions. Colin had made a salary sacrifice agreement with Chef Pty Ltd, which he believed kept his employer contributions from exceeding his concessional contributions cap of $50,000. Colin was unaware that he had exceeded the cap until he received a letter from the ATO about his potential liability for excess contributions tax.

Contributions from an employer that are not 'employer contributed amounts'The following are contributions made by an employer from an employee's after-tax take-home pay and thus need to be classified as personal contributed amounts:

where the employer has an obligation to do so and the employee has no choice (for example, under the rules of an employer-sponsored super fund or the rules of a defined benefit scheme)

where voluntarily directed by the employee (for example, under arrangements authorising a regular pay-roll deduction).

For more information, see Personal contributed amount.

Contributions for a spouse of the employer or is a person who is under 18Employer contributions are reported at Employer contributed amount, rather than at any other field, even if they are:

contributions made by an employer of a child under 18 years of age – don’t report these at the Spouse and child contributions field unless the employer is acting in their capacity as a relative or friend rather than in their capacity as an employer

contributions made by an employer for the employer’s spouse – don’t report these at the Spouse and child contributions field unless the employer is acting in their capacity as the spouse of the member rather than in their capacity as an employer.

Reporting contributions from the ATOInclude in the Employer contributed amount field:

any super guarantee charge we contributed for a member – these are paid in lieu of contributions an employer failed to provide for the member

any amounts we contributed for a member by transfer from their superannuation holding accounts (SHA) special account, but only to the extent they are characterised as a taxable component – the taxable component represents employer contributions, such as super guarantee charge, that we have been holding in the SHA special account for the member.

Special rules for CPFsThere are special reporting rules in the MCS reporting specification to deal with the fact that:

employer contributions to CPFs are not counted towards members' concessional contributions caps and are not counted for LISC purposes

certain employer contributions to CPFs (generally salary sacrifice contributions) are counted for the purposes of assessment of Division 293 Tax

employer contributions made to another fund but rolled over to the CPF are counted for all of the above measures.

Some of your members – those considered state higher-level officer holders – will have certain contributions exempted from having this tax applied unless they are salary packaged contributions. However, all contributions still need to be reported because they count towards the determination of the $300,000 threshold for division 293 tax but not for ECT.

CPFs and their administrators should examine this aspect of the MCS reporting specification carefully and approach us if there are any concerns about what the new requirements are and how they change from year to year.

Special rules for defined benefits fundsAs well as reporting any actual employer contributions paid in relation to a member's accumulation interest in the fund, a defined benefit fund or scheme may need to give us contributions information in relation to the member's defined benefit interest. These are referred to in the MCS as notional taxed contributions for the purposes of excess contributions tax and defined benefit contributions (or notional employer contributions) for the purposes of Division 293 tax. Each is generally intended to reflect what an employer would have needed to contribute in that year to fund the member’s expected final benefit but they are calculated differently in each case and should not be confused. In both cases the trustee of the fund determines the amount with the advice of an actuary.

Notional taxed contributions for ECTNotional taxed contributions are reported in a separate field from the 2012–13 financial year. Before that they were included with employer contributions.

A transitional provision applies for members who held their defined benefit account on 5 September 2006 and satisfy certain other conditions. Under this transitional arrangement, if the notional taxed contributions determined with advice from an actuary exceed the concessional contributions cap for the financial year, then you must report your member’s notional taxed contribution as being equal to the cap.

There are other special rules in relation to public sector defined benefit funds and schemes. In some circumstances, notional taxed contributions are deemed to be nil.

If you are reporting for a public sector super scheme that was established before 5 September 2006 and the trustee has chosen to exclude last-minute employer contributions from its assessable income under section 295-180 of the ITAA 1997, you must report these amounts only at the field All contributions received for the current year and not at the Employer contributed amount field.

Defined benefits contributions for Division 293 taxDefined benefit contributions were not previously reported but from 2012–13 need to be included at the field Notional employer contributions. In 2013-14 the name has changed to Defined benefit contributions. The difference between the name of the MCS field and the legal name of the amount to be reported arose because of the late introduction of the relevant law.

Reporting employer contributions included in the calculation of notional contributionsIn some circumstances contributions actually made by an employer to a defined benefit fund are not reported as Employer contributed amounts but are instead included in the calculations of notional taxed contributions or defined benefit contributions. If you are reporting for a defined benefit fund, make sure you understand this issue and report contributions at the correct field so that we can correctly assess excess contributions tax and Division 293 tax.

For example, for excess contributions tax the notional taxed contributions of certain members in certain circumstances can be simply the amount of concessional contributions

made to the super fund for the member during the financial year. This amount is reported at Notional taxed contributions, not at Employer contributed amounts.

Refer to ATO ID 2008/162 Excess Contributions Tax: notional taxed contributions – PSS Defined Benefit Interest for more information about this example.

The contributions reporting obligations of defined benefit funds and public sector schemes are complex. Trustees and administrators should ensure that their procedures and systems are based on sound advice. You may need to ask us to provide written advice on some member contributions reporting issues.

Personal contributed amountPersonal contributions are generally those made by a member for their own benefit from after-tax monies at their personal disposal.

For issues involved in distinguishing personal contributions from employer contributions, see Employer contributed amount.

Contributions that are personal contributed amountsBoth concessional and non-concessional contributions made by the member are reported here.

The Personal contributed amounts field is used for most personal contributions, but there are special rules and concessions that apply to some personal contributions and they are reported separately in order for us to properly administer them. For more information, see:

Capital gains tax cap election amounts

Personal injury election amount

Assessable foreign fund amount .

The personal contributions to which each of these concessions apply are reported at the appropriate specific field, with only the remainder being reported at the general Personal contributed amounts field.

If a member seeks to have a concession applied to a contribution and the fund decides that concession is not applicable, the contribution should be reported as personal contributed amounts. For example, if a contribution is made with a capital gains tax election that the fund determines is invalid, the contribution must be reported at the Personal contributed amounts field and not at the Capital gains tax cap election amounts field.

Ensure your processes and systems recognise how the Personal contributed amounts field interacts with these other, specialised personal contributions.

For 2013 and prior financial years, include amounts reported to you by another provider with a rollover at label 15(b) on a Rollover benefits statement (NAT 70944) – these are personal contributed amounts made to that other provider in the financial year in which the rollover occurred.

These amounts will cease to be reported in this way in the MCS for 2013–14 and later financial years (see Manage change).

Transfers from non-complying fundsInclude the total payment you receive as a transfer from a non-complying fund for the member at the field Personal contributed amount. Report the entire amount of the payment received from the non-complying fund – the amount reported should not be reduced or varied due to fees, tax or interest. This amount is not only the contributions amount the member had made to a non-complying fund but rather the total amount of the transfer. This entire payment amount transferred from the non-complying fund is a member contribution.

Insurance premiums paid by memberInsurance premiums paid to a super provider by the member are personal contributions. Make sure you are not disregarding these premiums when deciding what to report when you do lodge an MCS. Even though your fund may not be able to accept co-contributions, some of your members may have an entitlement arising from the premiums that could be paid to another fund.

Example

The super fund Secure Life Super has a range of risk-only or insurance-only policies where members pay an annual premium and the fund provides cover for death and disability. Sayed is one of these members and paid a premium of $1,000 in both 2007–08 and 2008–09. Secure Life Super lodged MCS for policies with accumulation accounts but not for its risk-only policies. Sayed was not made aware that the premium payments were personal contributions to a super fund.

In late 2010, the ATO conducts a routine audit of Secure Life Super. It identifies that the MCS is routinely not lodged for a large proportion of the fund’s membership. The fund is found not to be compliant with its reporting obligations on this issue. Following the audit, Secure Life Super lodges the outstanding MCS to correct its error, reporting the premiums as personal contributed amounts. It also reports that co-contributions cannot be accepted by the fund for the risk-only accounts.

A failure to lodge administrative penalty is imposed on Secure Life Super for the large number of MCS lodged late.

It is determined that Sayed is entitled to co-contributions for 2007–08 and 2008–09 totalling $3,000. As the fund has reported that co-contributions cannot be accepted, the ATO asks Sayed to nominate another super fund to which the entitlements will be paid.

Effect of a 'Notice of intention to claim a deduction'

Self-employed members and other eligible members may provide you with a form notifying you of their intention to claim an income tax deduction in their personal tax return for some or all of the personal contributions they made on their own behalf during a financial year.

A personal contribution does not cease to be a personal contribution when the member notifies you of their intention to claim a deduction for the contribution with a notice under section 290-170 of the Income Tax Assessment Act 1997.

Even though the income tax consequences have changed for the fund and for the member, you must not change how you report the contribution to us.

This means that both concessional and non-concessional personal contributions are reported at the Personal contributed amounts field.

While you will need to distinguish concessional and non-concessional personal contributions for other purposes (for both the fund's income tax obligations and for calculation of member taxable and tax-free components) you don't need to do so for reporting on the MCS. As you may receive a notice of intention to deduct personal contributions long after the end of the financial year, it is often impossible for you to achieve this characterisation at 31 October when the MCS is lodged. Because of these timing difficulties with the MCS, our internal systems have been designed so that it is the ATO that characterises the personal contributions reported on the MCS as either concessional or non-concessional, depending on whether we allow a deduction for those contributions when the member lodges their income tax return.

Never characterise personal contributions as employer contributions, no matter how they are treated for income tax purposes by the member or the fund.

Providers that report all concessional contributions at Employer contributed amounts regardless of their actual nature are not complying with their legal obligations and risk incurring penalties. If personal contributions are incorrectly reported as employer contributions (or other types of contributions) your members may:

miss out on co-contributions entitlements

be treated incorrectly as having exceeded their concessional contributions cap not be assessed when they have exceeded the non-concessional cap.

Capital gains tax cap election amountsThese include the:

small business retirement exemption amount

small business 15-year exemption amount..

Whether a person is eligible to make these elections is a complex matter on which super providers will not be able to advise members. You should urge members to seek professional advice before making contributions subject to these elections and refer them to Guide to capital gains tax concessions for small business (NAT 8384).

These fields are used for reporting personal contributions that a member validly elects to exclude from counting toward their non-concessional cap using the capital gains tax small business concessions.

Include contributions at these fields if you received a valid election with these contributions or before they are made. You are obliged to check the validity of this election but only to the extent it is possible and reasonable to do so. The following are examples of questions about the validity of the election that we expect providers to be routinely asking to determine validity:

Was the election received by the provider before or on the date on which the contribution was made?

Was the election given in respect of contributions made by the member and not in respect of contributions made by another person, such as an employer?

Was the election made in the approved form?

Do you hold the member's TFN?

Where you become aware a CGT cap election was not in fact valid after you have lodged an MCS you must amend the MCS to re-report the contributions as personal contributions. You may become aware of this if either the member or we advise you that this is the case or if you review your previous reporting.

Election issues

Late electionsA late election is one made any time after the contribution it purports to apply to has been made. A late election is not effective, and the member's contribution should be reported at the Personal contributed amounts field, not at either of the Capital gains tax election fields. You should refer members seeking to lodge late elections to us for advice as this is not a matter in which the trustee of a super fund has any discretion.

Retirement exemption elections in excess of $500,000Members may not elect to exclude more than $500,000 under the small business retirement exemption amount. Even if they do so, you are not permitted to report amounts in excess of $500,000 at this MCS field. To report correctly, the balance in excess of $500,000 must be reported at the Personal contributed amount field.

Example

In May 2008, with a personal contribution of $700,000, Adam gives a Capital gains tax cap election to TOP Super Fund that claims an amount of $700,000 for the small business retirement exemption. Client service representatives from TOP contact Adam to advise him of his error and of the fact that TOP cannot report more than $500,000 to the ATO. They suggest he seek professional advice about whether he will have an excess contributions tax liability. Adam says he already has professional advice and insists the election is correct.

In October 2009 TOP prepares an MCS in respect of Adam's contributions. In order to report correctly for Adam, in the approved form, TOP reports $500,000 at the Small business retirement exemption amount field and $200,000 at the Personal contributed amount field.

Elections not in respect of personal contributionsThe capital gains tax election is to exclude personal contributions from the non-concessional contributions cap. It does not apply to any other type of contribution, such as contributions made by the member's employer, spouse or business entities associated with the member.

Elections not in the approved formThis election must be made using the Capital gains tax cap election (NAT 71161). Only these forms are the approved form. They must be completed in full and signed by the member.

No TFNA personal contribution made with a capital gains tax election is a member contribution for the purposes of the contributions standards and so cannot be accepted if a valid TFN is not either:

on the election form

already held by the fund.

Refer to regulation 7.04 of the SISR for more detail about the contributions standards and acceptance of member contributions.

Personal injury election amount This field is used for reporting personal contributions that a member validly elects to exclude from counting toward their non-concessional cap as they have arisen from a structured settlement or order for personal injuries.

To be eligible, the contributions must arise from either:

a structured settlement payment

an order for a personal injury payment

a lump sum workers compensation payment, and only apply to that part of these amounts that is compensation or damages for personal injury.

The member must have made the contribution within 90 days of the later of the following dates:

the date the member received the personal injury payment

the date the member entered into an agreement for settlement of a personal injury

the date on which an order for a personal injury payment was made.

You must have received a completed Contributions for personal injury election (NAT 71162) form from the member on or before the member made the contribution.

You are not required to investigate these matters when you receive an election. However, if you are alerted to the fact that these eligibility requirements have not been met then you should treat the member's election as invalid.

Whether a person is eligible to make this election is a complex matter on which super providers will not be able to advise members. You should urge members to seek professional advice before making contributions subject to this election.

Include contributions at this field if you received a valid personal injury election with the contributions. You are obliged to check the validity of this election but only to the extent it is possible and reasonable to do so.

The following are examples of questions about the validity of the election that we expect providers to be routinely asking to determine its validity:

Was the election received by you before or on the date on which the contribution was made?

Was the election given in respect of contributions made by the member, or under the member's direction, and not for contributions made by another person, such as an employer?

Was the election made in the approved form?

Do you hold the member's TFN?

Election issues

Late electionsYou should refer members seeking to lodge late elections to us for advice, since this is not a matter in which the trustee of a super fund has any discretion.

Elections not in respect of personal contributionsThe personal injury election is to exclude personal contributions from the non-concessional contributions cap. It does not apply to any other type of contribution.

Elections not in the approved formThis election must be made using the Contributions for personal injury (NAT 71162) form. Only these forms are the approved form. They must be completed in full and signed by the member or the member's legal representative.

No TFNA personal contribution made with a personal injury election is a member contribution for the purposes of the contributions standards and so cannot be accepted if a valid TFN is not either:

on the election form

already held by the fund.

Refer to regulation 7.04 of the SISR for more detail about the contributions standards and acceptance of member contributions.

Spouse and child contributions amount Contributions included at this field are:

contributions made by the member’s spouse

contributions made for a member less than 18 years old

contributions from the first home saver account (FHSA) of a member’s spouse or former spouse.

Contributions made by the member's spouseIf a person advises that they are making a contribution for the benefit of a member in their capacity as the member’s spouse, then the contribution needs to be reported at this field. Spouse includes a person:

to whom the member is married (but is not separated from on a permanent basis)

with whom the member is in a relationship that is registered under certain state or territory laws (including registered same-sex relationships)

who lives with the member on a genuine domestic basis in a relationship as a couple (known as a de-facto couple and including same-sex couples).

However, do not include at this field contributions made by a spouse living separately and apart from the person on a permanent basis, even if they remain married. If a contribution is received for a member from such a spouse or former spouse, it is reported at Other family and friends contributions,.

If the spouse of a member is also their employer, the contributions they make for the member must be reported according to the capacity in which they make a particular contribution. For example, contributions made in the capacity of an employer to meet super guarantee obligations will be reported as employer contributed amounts while extra contributions made only because of their personal relationship as a couple will be reported as spouse and child contributions.

Contributions made for a member less than 18 years oldContributions made for a child means any contributions made for a member who was less than 18 years old at the time the contribution was made, excluding:

personal contributions made by the member themselves

employer contributions made by a person acting in their capacity as the employer of the member (even if they are also a parent or relative of the member – as long as they are making the contribution in their capacity as an employer).

Contributions made by a parent of the member are not reported as contributions made for a child unless the member is less than 18 years old. This is true regardless of whether the member is financially dependant upon the parent or not. If the member is over 18 years old, contributions made by a parent should be reported at the field Other family and friend contributions amount.

Contributions from the First home saver account (FHSA) of a member's spouse or former spouseContributions in this category may be infrequent; however, you must set up procedures to identify them when they are made and report them correctly.

A family law obligation may require that your member's spouse or former spouse close their FHSA and transfer some or all of the balance to your member's super account. This transfer is equivalent to a spouse contribution and must be reported on the MCS at the Spouse and child contribution amounts field.

You will find these contributions from a FHSA provider are readily identifiable as they must be accompanied by the form Super contributions from a first home saver account under a family law obligation (NAT 72629).

Contributions from a member’s own FHSA or government FHSA contributions made by the ATO following the closure of the member’s FHSA are reported only at the field All contributions

received for the current year and at no other MCS field.

Other family and friend contributions amount These third party contributions are not personal contributions or employer contributions according to the basic rules and do not fit the other special categories.

Include at this field contributions made by third party contributors, including:

the member’s former spouse

a person to whom the member is married but is now living separately and apart from on a permanent basis

a parent, child or other relative of the member (where the member is over 18 years old)

a friend of the member

policy entitlements paid by insurance companies in the form of super contributions

statutory compensation paid by government agencies in the form of super contributions

a person or organisation making a contribution by way of a gift to the member only out of charity

the employer of the member's spouse or other relative

the ATO or other government agencies making contributions to compensate members for errors in their administration of the law

amounts reported at label 15(f) on a Rollover benefits statement (NAT 70944) received from a transferor provider (for 2013 and prior financial years).

There are special rules in the specifications for CPFs about the use of this field – see Special rules for CPFs.

Consider the distinction between contributions made by third party contributors:

on their own initiative or obligation, for the benefit of a member – these are other family and friends contributions

under the member's direction or instruction dealing with monies the member would otherwise have been personally entitled to – these are personal contributions.

Make your members and contributors aware of this sometimes complex distinction too. Take reasonable steps to ensure you collect correct information from them when these contributions are made.

Make sure your practices and procedures for the collection of information when contributions are made don't routinely characterise all contributions made by third party contributors as personal

contributions.

Example - personal contribution made by a third party

Quynh's grandmother died and Quynh inherited a share of her house. The trustee of the estate sold the house and distributed the proceeds to the beneficiaries. In accordance with Quynh's instructions, the trustee paid $120,000 into Quynh's super fund. Based on the information Quynh provided about the contribution, the super fund lodged an MCS that correctly reported it as a personal contribution.

Example - other family and friends contribution made as a gift

When Paul's grandfather died, his grandmother sold the family home and decided to distribute the proceeds to her grandchildren. She was concerned they would squander her gift, so decided to contribute each share to each grandchild's super fund. Paul gave her his super fund's details, and she contributed $120,000 into his super fund for him. The super fund lodged an MCS that correctly reported the contribution as an Other family and friends contribution.

Example - other family and friends contribution made under an insurance obligation

Tom's employer did not offer generous leave conditions, so he took out income replacement insurance. When Tom was very ill for eight months, he was forced to use leave without pay for some of the time. Under his insurance policy, regular payments were made to him to replace his salary during that time. In addition, the insurance company made payments directly to Tom's super fund in lieu of the contributions his employer might have made for him had he not been on sick leave without pay. Tom's super fund correctly reported these contributions in an MCS for Tom as other family and friend contributions.

Directed termination paymentsThe concessional treatment of directed termination payments was a transitional measure that ended on 30 June 2012. There is therefore no longer a field available on the MCS to allow the taxable component of these payments to be separately reported.

If you receive payments from employers after this date that purport to be directed termination payments, report the entire payment as a personal contribution (not just the amount that is purported to be the taxable component).

If you contact the member or their employer and decide the contribution was made in error (that is, in the belief that directed termination payments could still be made) you may alternatively decide not to accept the contribution and thus will not report it.

From 2008 up to and including the 2011–12 financial year, transitional arrangements applied in section 82-10F of the Income Tax (Transitional Provisions) Assessment Act 1997. When a person's employment was terminated and the payer (generally the employer) was planning to pay a transitional termination payment, the person could ask their employer to direct any

transitional termination payments to a super provider. This was called a directed termination payment.

If you receive a Directed termination payment statement (NAT 70766) with a contribution you must decide whether you will either:

not accept the contribution because it was made in error and thus not report the contribution in an MCS

treat the entire contribution as a personal contribution and report it in the MCS at the field Personal contributed amount

advise the member that the amount should be included in their assessable income.

Amounts transferred from foreign fundsA member can transfer their interest or entitlement in a foreign fund to an Australian provider; they pay some income tax but only on the applicable fund earnings. If they complete the transfer within six months of becoming an Australian resident (or terminating foreign employment as an Australian resident), the applicable fund earnings are always nil. Otherwise, the applicable fund earnings are, in general terms, the earnings on the member’s foreign super interest that accrued since they became an Australian resident or terminated their foreign employment.

A member can choose to include the applicable fund earnings in the assessable income of the Australian provider as an alternative to paying income tax on the amount themselves. They make this choice by giving you the Tax payable on a foreign super transfer form (NAT 11724 ) or by providing the same information in a form you give them. This is the only means of making this choice.

Transfers from New Zealand KiwiSaver SchemesTransfers from KiwiSaver Schemes under trans-Tasman portability arrangements are not treated the same as other foreign fund transfers. The KiwiSaver tax-free amount is reported on the MCS at Non-assessable foreign fund amount but there are different rules for deciding the part of the transfer to be included.

You should not accept these transfers from New Zealand unless you have built systems and processes to allow you to do so, including to:

store details of KiwiSaver tax-free components, and pass these details to other funds with a rollover

comply with the regulatory rules that apply to these components (such as no rollovers to SMSFs and preservation until age 60)

comply with the tax rules that apply when these amounts are paid to the member as a benefit

report the KiwiSaver tax-free amount in an MCS when first transferred from New Zealand.

The KiwiSaver tax-free amount is treated as a non-concessional contribution and we count it towards the member's non-concessional cap. It is the entire amount of the transfer less any amounts that either the KiwiSaver Scheme or the member advises you are:

Australian-sourced amounts returning to Australia

New Zealand-sourced amounts that were previously transferred to Australia and are now returning again.

You must not accept transfers from a KiwiSaver Scheme before obtaining information about these components of the amount to be transferred.

For more information refer to Trans-Tasman retirement savings portability scheme for individuals

Your reporting obligationsAll money received from a foreign fund transfer are contributions (according to the ordinary meaning discussed in taxation ruling TR2010/1) and must be reported on the MCS.

There are two possible components for transfers from New Zealand KiwiSaver Schemes:

KiwiSaver tax-free amount – these are reported at Non-assessable foreign fund amounts

the balance of the payment – this is reported only at All contributions received for the financial year

There are three possible components for other foreign fund transfers:

amounts that the member has chosen to include in the assessable income of the provider

assessable foreign fund amount

non-assessable foreign fund amount.

Don't confuse transfers from New Zealand KiwiSaver schemes with other transfers from foreign funds. Although they share the same reporting fields the rules for their treatment are different.

Assessable foreign fund amountThis is the difference between:

the amount in the foreign super fund vested in the member at the time the foreign transfer occurs, and

the amount actually transferred to the Australian provider by the foreign fund.

This can arise, for example, when a foreign employer allocates an additional discretionary payment to the member as a golden handshake or in recognition of years of service.

Generally, foreign fund earnings are regarded as vested in the member, even if they are not calculated and applied to the member’s account until the transfer occurs and even if earnings won’t be applied to other members' accounts until a later date.

Don’t confuse the assessable foreign fund amount with the amount the member chooses to include in the fund’s assessable income.

Non-assessable foreign fund amounts This is the entire foreign fund transfer less:

any amounts included in the field Assessable foreign fund amount

any amounts that the member has chosen to include in the assessable income of the provider (the amount shown at section D, question 17 on the Tax payable on a foreign super transfer form) – use nil if the member did not make this choice.

This amount often makes up most of a foreign fund transfer.

Transfers from reservesProvide at these fields amounts transferred or allocated from reserves where they are either:

assessable amounts

non-assessable amounts.

Whether or not the assessable and non-assessable amounts are within the ordinary meaning of contributions, providers have an obligation to implement systems and processes to identify and calculate these amounts and report them to us in the MCS.

Generally, all allocations from reserves are reported at this field as either assessable or non-assessable amounts, but certain exceptions do apply. For example, the following allocations from reserves are generally not reported as assessable amounts:

amounts allocated to all members, or to a class of members to which the reserve relates, on a fair and reasonable basis

amounts allocated for the sole purpose of discharging super income stream liabilities that are currently payable

allocations following the commutation of a pension, where the amount in the reserve is allocated to a member who is the primary beneficiary of the pension and it is used to support another income stream for that member.

Example

Wellington Super had accumulated earnings in an investment reserve. On 1 May 2013, the trustees distributed the balance of the reserve to the members to which the reserve related in proportion to their interest in the fund on that day. In the 2012–13 MCS, Wellington Super reported these amounts in the field All contributions received for the current year and did not report any amounts as either assessable or non-assessable transfers from reserve.

For 2013 and prior financial years, include at this label amounts reported at label 15(j) on a Rollover benefits statement (NAT 70944) received from a transferor provider.

Allocations in lieu of employer contributionsAn allocation from a reserve in lieu of an employer contribution is generally reported at this label as an assessable amount (and is not reported as an employer contribution). Providers must gross-up the amount to be reported by 1.176 to reflect the employer contribution (before 15% tax) that would have been required to fund the amount actually allocated. However, this grossing up method results in a reporting requirement that does not precisely reflect the equivalent contribution that an employer would have made.

For example, the trustee of a fund allocates $8,500 from the fund's reserves to a member’s account, being 15% less than the $10,000 that the member's employer might otherwise have contributed. In an MCS for the member the fund reports a transferred from reserves amount of $9,996 ($8,500 x 1.176), not the amount of the allocation ($8,500) and not precisely the amount of the equivalent employer contribution ($10,000).

For more information amounts transferred from reserves, refer to the Income Tax Assessment Regulations 1997:

regulation 292-25.01

subregulations 292-25(4) and (5)

regulation 292-90.01.

Application of these regulations is a complex matter. Super providers should obtain advice from suitably qualified people, either in-house or externally. If there is doubt about how the regulations should properly be applied in the provider’s circumstances, it may be necessary to seek our advice in writing.

Contributions made to a previously non-complying fund This field is only used by super providers that became a complying super fund for the financial year being reported and were a non-complying super fund in the previous financial year.

To prevent members avoiding the contributions caps, providers in these circumstances must report at this field all contributions made for the member on or after 10 May 2006, but before the date on which the fund became complying. All types of contributions made in this period, according to the ordinary meaning of contributions, are included together at this field. Contributions made after the fund became complying are reported in the usual way at the appropriate fields.

All contributions received for the current yearThis field is not merely where a total of the contributions is reported but is also the place to report contributions that were not reported at the other MCS fields.

We use this field to assist in checking providers’ compliance with their reporting obligations. Show the following amounts in this field:

the total of all the contributions reported for the member at the other MCS fields, whether they are contributions according to the ordinary meaning or not, and

any contributions (according to the ordinary meaning in taxation ruling TR 2010/1) that are not reported elsewhere on the MCS.

Other contributions received for the member but not reported in any other field may include:

any contributions (according to the ordinary meaning in taxation ruling TR 2010/1) that are not reported elsewhere on the MCS

employer contributions made to a CPF for the 2012 and previous financial years only (see Special Requirements for CPFs)

co-contributions received by the provider for the member

SHASA super co-contribution credit amounts received by the provider for the member

LISC received by the provider for the member

a KiwiSaver amount that either the KiwiSaver Scheme or the member has shown to be:

an Australian-sourced KiwiSaver amount, which is generally an amount that was previously received by a KiwiSaver scheme from an Australian super provider, or

a returning New Zealand-sourced KiwiSaver amount, which is generally a New Zealand amount that has previously been treated as a non-assessable foreign fund amount in Australia.

All other KiwiSaver amounts are included at the Non-assessable foreign fund amount field.

the amount that a member has chosen to have included in the fund’s assessable income from a lump sum super benefit transferred from a foreign super fund or scheme,

last minute employer contributions that the trustee of a public sector super scheme has chosen not to include in assessable income

FHSA contributions received with the Super contributions from a first home saver account (NAT 72537 ) and government FHSA contributions with a remittance advice, and

for the 2007-08 - 2012-13 financial years only - amounts reported at label 15(k) on a Rollover benefits statement (NAT 70944) received from a transferor provider (to the extent these contributions have not been reported at any other MCS field).

Ensure your systems have not been designed to populate this field with a simple total of all the contribution fields. It is instead the sum of all the other fields plus any contributions not reported at those fields.

RolloversSince 1 July 2013 the Rollover benefits statement has not been used to report current year contributions to another provider when a rollover or transfer is made. Similarly, when the statement is provided in the rollover data standard there is no way to include contributions information in the message.

Providers who rollover or transfer to another provider, all or part of the member's super interest before the end of a financial year, must lodge an MCS for that member and must report all contributions received in the current financial year prior to the rollover.

For more information about Reporting rollovers accurately, the rollover benefits statement and rollover data standard, refer to our website.

Reporting member TFNsYou are obliged to report all information requested on the MCS, where you have this information. It is particularly important that you report each member's TFN. Without a member TFN For example, a member's TFN is central to the correct calculation of their entitlement to super co-contributions or LISC and the assessment of any liability to excess concessional contributions charge or Division 293 tax.

If you do not have a member’s TFN, you:

will not be able to accept certain member contributions

may be liable for additional income tax (31.5% on top of the 15% tax you already paid) on assessable contributions, such as employer contributions (including salary sacrifice contributions).

Report only valid member TFNsSince 1 January 2012, trustees of super funds and RSA providers have been able to use TFNs to:

locate amounts held for members within a fund

help consolidate amounts held for members.

There are rules that you must comply with if you do this.

Using TFNs in this way is relevant to your MCS reporting as you should use this process to identify invalid TFNs after two or more members give you the same TFN. The rules in the MCS specification for reporting TFNs have changed and you should examine these carefully to ensure you comply.

For more information, refer to Tax file numbers and super contributions.

You will regularly receive TFN notifications from us providing and correcting TFNs and you will use our Super TFN integrity check service (Super TICK) to validate a new member registration and first contribution under the data and payment standards.

For more information on Super TICK and TFN notification, refer to Ready for super reform - a guide for APRA-regulated super funds.

Exemption codes are not valid TFNsDo not report TFNs on the MCS if you know they are exemption codes rather than the member's valid TFN. Exemption codes, such as 444 444 444, have no place in the super industry. Their purpose is related to an exemption from withholding tax on interest and other investment income by banks and other investment bodies.

If your member or their employer quotes a number to you that you know is not the valid TFN of the member, like an exemption code or a simple string of digits, then you must treat them as a member who has not quoted a TFN. Attempt to obtain the correct number from them but if they do not give you their valid TFN, zero-fill the Member TFN field on the MCS to indicate that no member TFN was provided.

Example

In May 2013, Brunswick Super Fund reviewed the TFNs it held for all its members, checking for one or more members with the same TFN. It found that it held exemption codes for 90 of its members including many for whom pensions were being paid.

Brunswick wrote letters to these members in June 2013 seeking their correct TFN. If there was no response to the first letter a reminder was sent. If there was again no response, they phoned the members. By August, 85 of the members had responded with valid TFNs. The fund lodged an MCS in October 2013 for the five remaining members reporting no TFN (by zero-filling the Member tax file number field). For these members the fund also returned any member contributions received since 1 July 2007 (including super co-contributions) and applied additional tax to employer contributions being made for the members.

Amendments

When to amend an MCSIf, after lodging an MCS, you discover any material errors or omissions in the information you reported, you must lodge an amended MCS within 30 days of becoming aware of these errors.

This obligation has no time limitation and is not altered by any subsequent events such as the closure of the member's account or the commencement of a pension.

Example

Debra was nearing retirement age and for the last five years she was making regular personal contributions to Ridgeway Super to increase her super balance. She retired in August 2013 when aged 60 and rolled out her entire balance to Summerleas Retirement Scheme. Unknown to Debra, Ridgeway Super staff had made errors in processing her contributions, and the fund had not reported any of the personal contributions in the MCS it lodged for her each year.

She visited an accountant in September 2014 who realised she was entitled to a super co-contribution. Debra checked her records and contacted Ridgeway Super to ask why no co-contribution was received.

Ridgeway Super accepted that an error was made but told Debra that they could not amend the MCS because her account was now closed. Debra wrote to the ATO to complain about this refusal. The ATO advised Ridgeway of its obligation to correct all material errors even after an account is closed. The fund then recognised its obligation, lodging an amended MCS more than eight months after Debra first brought the error to the fund's attention. Being seven months late, the ATO imposed a penalty on the fund for late lodgment. The ATO paid the co-contribution directly to Debra as she had retired.

Correcting systemic reporting errorsEnsure that you have processes in place to identify and correct systemic reporting issues when you are asked to correct an error for a member. Penalties may apply if you do not take reasonable care. If a member brings an error to your attention, you need to:

correct the error for that member

check to see if the same error impacts other members so you can proactively fix it for them as well.

Example

In the last example, the ATO asked Ridgeway Super to check whether the errors staff made in processing Debra's personal contributions had occurred in other situations too. A data query identified that 3,000 other personal contributions were not reported to the ATO. Ridgeway Super developed new staff procedures so that this sort of error would not recur and amended its reporting for the 3,000 cases.

Only amend to correct a genuine errorFunds may only amend an MCS where genuine errors have occurred. You should not amend an MCS because, for example, a member has decided that they wish to change the amount or character of the contributions they made during the year to avoid an excess contributions tax liability.

Only amend an MCS if you have made a genuine and material error. Member pressure does not change whether an error is genuine or material.

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

Only amend to correct material changesIf you submit an MCS without certain information that you are later provided with and this information does not represent a material change or omission to what you have already provided, you have no obligation to lodge an amendment. For example, if you are advised, after you lodge an MCS for a particular financial year, of a member’s change of name and address that occurred during the year, you do not amend that MCS. You advise us of the changed details in the next MCS you lodge for that member.

Mistake and returning contributionsIn some limited circumstances, you may be required to amend an MCS when the retrospective operation of the law causes a transaction to be unwound or become void. This most commonly occurs when you return contributions credited to a member's account in restitution of a legal error of fact (a legal mistake). It can also occur when we send you a TFN notice (see Amendment obligations when new member data is provided).

Example

An employer made contributions to Fund ABC in respect of a number of employees in June 2009. However, the fund's administrative staff misread the instructions the employer provided with the contributions and allocated too much to one member and too little to another. The error was not discovered until December 2009, after the fund had given a 2009 MCS for each of the affected members.

Fund ABC had made a legal error of fact and to correct it in December 2009 transferred amounts between the accounts of the affected members. The reallocation of contributions was treated as having retrospective effect back to June 2009. Each member's 2009 MCS was amended to reflect this.

Contributions generally cannot be returned to a member merely because they regret making them or because they or their agents made an error in their decision to contribute. We will be applying considerable scrutiny to situations where contributions are returned to a member, or they are re-characterised, after the member realises that they have exceeded a contributions cap. Understand your legal obligations in these situations and develop procedures and systems to ensure member requests of this nature are considered very carefully.

While we will scrutinise these decisions, we do recognise that there are many circumstances where a decision to amend will be entirely correct and a failure to do so would be a failure to report correctly.

Example

Walter, a self-employed investor and businessman, made a super contribution to Big Super without the involvement of any other person or entity and using a personal cheque drawing on a bank account in his own name. In error, he entered this contribution on one of Big Super's forms as a contribution by an employer. He put his name down as both employer and employee and failed to indicate the nature of the contribution, despite a clear alert on the form that said, 'All contributions will be treated as super guarantee contributions unless otherwise indicated'. Big Super recorded the contribution as an employer contribution and reported it as such to the ATO in an MCS for Walter.

Walter received an excess contributions tax assessment based on the MCS that indicated he had exceeded the concessional cap. Walter asked Big Super to amend the MCS. He provided evidence that he had made the contribution himself. Using their internal records, the fund also considered the obvious errors in the form Walter had given them and the cheque's drawer.

Big Super agreed that the contribution had been mischaracterised by them when it was made. Despite the fact that Walter's lack of care in completing the form was the source of the error, the fund recognised its obligation to now amend the MCS involved, correcting what was now known to be a reporting error.

Do not assume that whether or not contributions have been returned always determines whether or not they should be reported in the MCS or an amendment lodged to remove them from a previously lodged MCS.

ATO ID 2010/104 states that a personal contribution may still be included in an individual’s non-concessional contributions for the financial year even if a trustee has repaid it to the member in restitution of a purported mistaken payment.

If a fund correctly returns contributions in accordance with the law of restitution, it must amend its reporting so that the contributions are not counted towards the member's contributions caps. However, in circumstances where the law of restitution does not properly apply to unwind or void a transaction, a fund must continue to report the contributions, even if they have been returned.

Amendment obligations when new member data is providedAn existing member might provide you with a TFN, either because they previously had not given one or because the TFN they had previously given you was incorrect. In these circumstances, do not lodge an amended MCS for previous years. The new data you now have relates only to the current year and you must provide it only in the next MCS you lodge for the member. The same principles apply to other member data such as changes of name, date of birth and address. The MCS tells us the data you hold about a member at a point in time, so changes in one year don't require you to go back and amend for other years. The same principles apply if you receive new information from other sources such as a TFN notification from us or updated information from the member's employer.

Example

A member, Claire, tells her fund in December 2011 that she has changed her name, address and marital status. The fund reports the new details in the member's 2012 MCS that they lodge on 31 October 2012. The fund does not amend Claire's 2011 MCS to show the new details.

Example

Medlock Super is the default fund for TWH Pty Ltd. Tom's account was opened when he became an employee of TWH in March 2011 but Medlock Super has never had Tom's TFN. Medlock Super had paid no-TFN contributions tax on the employer contributions being made for Tom. They lodged a 2010–11 MCS for Tom without a TFN.

Tom gave Medlock Super his TFN in December 2011. They report the TFN in Tom's 2011-12 MCS (but they do not amend Tom's 2010–11 MCS as they held no TFN for him that year).

Medlock Super can claim a no-TFN tax offset in their 2011-12 tax return as no-TFN tax was payable within the most recent three income years.

There are two important exceptions to this principle:

You must amend to correct your own errors or omissions within 30 days of becoming aware of them.

When you are advised of a change of details but fail to report the change correctly in that year's MCS, you may need to later amend that MCS once you become aware of your error, but only when it's a material error.

An error or omission in a member's TFN would always be a material error that would require amendment without delay.

You are required to remove a TFN from your records if you receive a notice under section 299TB of SISA).

The legal effect of this notice is that the members listed on the notice are taken not to have ever provided their TFN to you.

The effect is a retrospective one – as a result of the notice, you may have an obligation to pay no-TFN contributions tax on the members' employer contributions and other taxable contributions, and must return all member contributions made by the affected members on or after 1 July 2007.

You must also return any co-contributions to us.

The important MCS consequence is that you must, within 30 days, amend each MCS lodged for the affected members for 2007–08 and later years. The amended MCS should not include the TFN and, where relevant, should reflect the return of any member contributions.

This exception does not apply when you receive notices under either section 299TA or section 299TC of SISA) or when you receive a response from our SuperTICK service.

How to amend an MCSWhen amending MCS data for particular member accounts, you must ensure that all the correct previously reported data in the original MCS for those accounts is re-reported on the amended MCS exactly as it was in the original lodgment. An amended statement for a particular member account replaces the original MCS given for that account. Any original data that has not been included in an amended statement will no longer be considered when the amended MCS causes our systems to alter determinations of co-contributions entitlement or excess contributions tax assessments.

Only change the specific data that is to be amended for a particular member. Report all other information exactly the same as in the original MCS for that member.

The amended MCS must report the correct amounts for all fields for that financial year, not the difference between the original and the amended amounts. Inaccurate reporting of the members contributions means you may be penalised and members may, for example:

miss out on co-contribution entitlements and LISC

not be correctly assessed for excess concessional charge.

It is particularly important that the composition and value of contributions are correctly reported to us.

To ensure that the amended MCS is processed correctly for the member, it is imperative that the fields Provider member account number and Provider client identifier are identical to those in the original MCS for that member account.

You should, at least for 2012–13 and onwards, always be reporting correct account numbers and client identifiers. They must be the numbers you hold in your records for identification of members and their accounts rather than being numbers only used on the MCS. We will use the member account number and the client identifier you provide on the MCS to display information on our online services. Our online services rely on consistent reporting of the same numbers year-to-year in order to display your members' latest records. If you use different numbers, the display may show two accounts when only one exists. This may confuse members and they may contact you as a result.

If you fail to provide exactly the same member details on an amended MCS at these two key fields, our systems may treat the amended MCS as an original lodgment, creating two separate MCS records for the member for the same financial year. This double reporting of the member's contributions may result in the member exceeding the contributions caps and incurring an excess concessional contributions charge.

Never change the member account details when you amend the MCS, unless they were incorrectly reported in the original MCS. See How to amend member account details.

When you amend an MCS using the same account details, the last MCS we processed will be the one that is used in the super system for the member. To minimise the likelihood of us processing MCS in the incorrect order, you should not report more than one MCS for the same account details on the same day.

How to amend member account detailsIf the original MCS reported the member account details incorrectly, you need to lodge two MCS to correct your reporting.

The first MCS should report the same member account details as the original, but this time you should report all of the contributions as nil. This will replace the original MCS and remove the contributions from the super system. This may result in changes to the member's co-contribution entitlement and a reduction in or removal of an excess contributions tax liability.

The second MCS should be a new report with all of the correct account and contribution details for the member. This will restore the member to the correct position in the super system. To minimise problems for your members, these two MCS should be lodged as close together as possible (but, as noted above, not on the same day).

Other specific issues

Mergers, restructures and successor fund transfers Where funds are involved in mergers or successor fund transfers, they have an obligation to ensure that they have suitable procedures and processes in place, including archiving and record keeping, that will enable both funds to accurately report member information on either or both the RBS and the MCS.

Similarly, where a fund restructures and ceases to offer members a specific super plan or product, the fund has an obligation to ensure that members' records are archived in a manner which enables the fund to find the original source data or documents.

A successor fund must be provided with sufficient information to enable it to fully comply with any administrative obligations which may be transferred to it. Successor funds need to ensure that the information is stored in their systems in such a way as to enable complete and accurate reporting and amendments to MCS.

In a successor fund transfer unique reporting issues can arise. Identify these early and contact us so we can provide support and guidance.

ATO auditsAll funds have an obligation to have systems and controls in place that enable them to explain the basis of their MCS reporting and that will allow us to trace contributions information back to the source data and documents, in the event an audit is conducted.

Funds that are not practicing good record-keeping and reporting procedures are not fulfilling their obligations as required by the legislation, nor are they fulfilling their obligation to members.

Poor record-keeping and reporting practices used by funds may lead to inaccurate and incomplete reporting of member information. As a result, your members may for example:

miss out on co-contribution

be assessed for excess concessional contributions charge when they have not in fact exceeded one of the caps

not be assessed for excess concessional contributions charge when they have exceeded one of the caps or Division 293 tax when they are a very high income earner

have incorrect super information displayed for them on ATO Online.

Poor record keeping may also lead to members receiving incorrect benefit payments or incorrect tax treatment of their benefits.

These outcomes of poor record keeping and reporting undermine the integrity of the super system.

Funds risk incurring administrative penalties for non-compliant findings in an audit. See Penalties for incorrect MCS reporting.

Authorising an administrator or other supplier to lodge the MCSA super fund or other provider may want to use the services of a super administrator, accountant, tax agent or other separate entity to prepare and lodge the MCS on their behalf.

When they do, they must formally declare that they have authorised the supplier to do this and declare that the information they have given the supplier is true and correct.

The Member contributions statement – Supplier lodgment declaration (NAT 71913) is the approved form in which to make these two declarations. Once completed, you must retain each form for five years and must produce them if requested to do so by us.

If two or more legal entities work together to manage and administer your super fund, make sure you understand the legal role each entity fulfils in the lodgment of the MCS and ensure that the names of the provider and supplier are reported correctly.

Reporting all members and their account information

Lodge an MCS for anyone with a 'superannuation interest' during a financial yearFor 2012–13 and subsequent financial years, member information must be reported even where no contributions were received. An MCS must be provided for each member who held a super interest in the fund at any time during the financial year, including inactive members and members whose account is closed before 30 June. A super interest in a fund refers to a distinct claim of any kind against the fund, whether it be proprietary in character or not. For example, a trust deed may confer rights upon a person that amount to holding an interest in the fund.

A member who has provided a fund with personal details (perhaps through an employer) but has not yet made a contribution has no interest in the fund. No MCS is required in these circumstances even if the person is already regarded as a member of the fund and already has an account in the fund in their name.

Example - no interest exists and so no MCS lodged for member

Ruby Super regarded Maggie as a member of the fund from 5 June 2013 when Maggie's employer, Billie Pty Ltd, gave her details to the fund's administrator and caused an account to be opened in her name. The first contribution made by Billie Pty Ltd to Ruby Super was on 20 July 2013. Ruby Super did not lodge a 2012–13 MCS for Maggie.

However, there may be circumstances where an account with no transactions and nil balance does indicate that the member has a current interest in the fund. One way this occurs is where a potential entitlement to death or disability cover arises before contributions begin to be made.

Example - insurance-only interest requires MCS to be lodged

Emerald Super regarded Maggie as a member of the fund from 5 June 2013 when Maggie's employer, Billie Pty Ltd, gave her details to the fund's administrator and caused an account to be opened in her name. Under the terms of Emerald Super's insurance policy, the fund was insured for death and disability benefits for Maggie from the day she joined the fund, provided that employer contributions were made within 60 days.

The first contribution made by Billie Pty Ltd to Ruby Super was on 20 July 2013. Ruby Super lodged a 2012–13 MCS for Maggie for her insurance-only interest in the fund.

You must report the presence of any insurance interests if they fall within the definition of super interests. This allows us to adequately inform members about their super when they use our online services. There are warnings on the display screens to alert your members to find out more about the benefits they may lose if they consolidate accounts with insurance.

Example - benefit of insurance information for members

Julie was using ATO Online for the first time and found an account with a balance of only $100 that she had not been previously aware of. She at first thought it is not worth very much but was alerted by the display that insurance benefits were attached to the account. As the display recommended, she sought advice before deciding how to consolidate this account with a larger one.

When you report a member for whom contributions have never been made because they hold an insurance interest in the fund, use the date of their commencement in the fund as the date of last contribution or rollover on the MCS.

No 'Date of last contribution including rollovers'The MCS reporting specification assumes that there will always be a date when the last contribution or rollover was accepted into an account, as no member interest would otherwise exist. Our validation rules will not allow you to lodge an MCS for 2012–13 and later years without providing this date. However the assumption does not hold true for particular funds in particular circumstances and so you will be required to provide an appropriate arbitrary date.

For some funds and employers an insurance interest can commence when a person first becomes an employee and a member in the fund, even before the first employer contribution is made. When you report a member with an insurance interest for whom contributions have yet to be made, use the date of the commencement of their membership in the fund as the date of last contribution including rollovers on the MCS.

If the member has a defined benefit interest, contributions may not be made for them or if they are may not be attributable to them. You will need to choose the most reasonable and appropriate date for the particular circumstances.

Example

The State Biomedical Authority Super Scheme (SBASS) is a defined benefit fund with two classes of members.

Former directors of the State Biomedical Authority are not required to make contributions to the scheme and become entitled to an indexed pension based only on years of service and final salary. SBASS provides an MCS for each former director that reports the date of last contribution or rollover as the date of the commencement of their membership in the scheme.

Other members of SBASS make personal contributions of between 2% and 10% deducted from their salary during the period of their employment and become entitled to a pension and/or lump sum upon retirement based upon a formula that takes into account the period and rate of their contributions and their final salary. SBASS provides an MCS for each other member that reports the date of last contribution or rollover as the date of the members' last fortnightly personal contributions for the financial year.

Account attributes are reported either as at 30 June or as at the date of preparation of an MCSFor fields where the MCS specification does not give a particular requirement (such as Date of last contribution including rollovers) determine and report an account attribute as at the date you begin preparation of the MCS.

In practice it is when you run your reporting systems and begin generating an MCS file that the requirement is being answered by the provider. If the MCS specification does not require you to use 30 June, then the implied requirement is to use the actual date of your reporting.

The MCS specification only says that the date must not be in the future and our validation rules, which apply when your lodgment is loaded on the Business Portal, enforce only this limitation by testing that the last contribution date is not after the file creation date.

Examples

Contributions fields – there is clear direction given by the ATO in the MCS reporting specification and in this protocol that these are reported on the basis of the financial year of receipt of the contribution.

Account balance field – there was previously a loose requirement but there is now a much stricter requirement to report a 30 June balance (refer to the specification) but in any case you should not use the balance on the date of preparation of the MCS.

Account status – as there is no instruction to give the 30 June status, provide the best data available at the date of preparation of the MCS.

Insurance indicator – as there is no instruction to give the 30 June insurance status, provide the best data available at the date of preparation of the MCS.

Last contribution date – as there is no instruction to give the date of last contribution as at 30 June, provide the best data available at the date of preparation of the MCS.

Reporting 'account phase' and the date of a changeAccount phase operates like a flag that, once triggered, generally remains in place from one year to the next. The Date pension commenced or benefit payment phase commenced similarly remains static despite later payments.

Example - accumulation account becomes a pension account

A lump sum benefit was paid from an account on 1 November 2011 after the member satisfied a condition of release. No lump sums were paid since then. In the 2012–13 MCS

Account phase was reported as 'B' and Date pension commenced or benefit payment phase commenced was reported as 01112011.

In the 2013-14 MCS 'account phase was reported as code 'A' since code 'B' is no longer required in the MCS unless reporting for a defined benefit fund. When reporting for a defined benefit fund, code 'B' is still required together with the 'date pension commenced or benefit payment phase commenced of 01112011.

On 5 August 2014, a pension commenced to be paid from the account.

In the 2014–15 MCS Account phase was reported as 'P' and Date pension commenced or benefit payment phase commenced was reported as 05082014.

Example - account closes and pension paid from a new account

A lump sum benefit was paid from an account on 1 November 2011 after the member satisfied a condition of release. No lump sums were paid since then. In the 2012–13 MCS Account phase was reported as code 'B' and Date pension commenced or benefit payment phase commenced was reported as 01112011.

In the 2013-14 MCS 'account phase was reported as code 'A' since code 'B' is no longer required in the MCS unless reporting for a defined benefit fund. For a defined benefit fund code 'B' is still required together with the 'date pension commenced or benefit payment phase commenced of 01112011. On 5 August 2014, the account (number 1234) was closed and a new account (number 5678) was opened from which a pension commenced to be paid.

In the 2014–15 MCS for account 1234, Account phase was reported as code 'A' and Date pension commenced or benefit payment phase commenced was reported as 00000000.

(If this was a defined benefit fund, account phase would be reported as code 'B' and Date pension commenced or benefit payment phase commenced would be reported as 01112011)

In the 2014–15 MCS for account 5678, Account phase was reported as code 'P' and Date pension commenced or benefit payment phase commenced was reported as 05082014.

Reporting 'account status'Account status records whether an account is open or closed and, if it is open, whether it is a lost member account. In this context, open means open to contributions and ATO payments – it does not refer just to the existence or otherwise of the account – for example, a pension account is generally reported as closed. Examples that illustrate the differences between open and closed accounts are listed in the specification.

Take care to report accounts as open when ATO payments can be accepted.

Example - eligible rollover fund reports accounts as 'open'

Radford Rollover Fund is an eligible rollover fund. The fund cannot accept employer contributions and super co-contributions but can accept rollovers and certain member contributions including USM and other ATO payments. The administrator of Radford Rollover Fund lodges an MCS each year that reports almost all member accounts with an Account phase of open. Closed is only reported for accounts that held benefits during the year if they were rolled out before an MCS is prepared (or if a request to roll out was received and is being processed before an MCS is prepared). For all accounts, the administrator reports that super co-contributions and LISC are not accepted at the separate field for that purpose.

Reporting account balances

Establishing the 30 June balance of account based productsThe electronic reporting specification, for 2012–13 and later years, requires you to provide at account balance the closing balance of the member's account on 30 June of the reporting period as it is known when the MCS is prepared.

Investment manager announcements and other routine adjustments to the value of all member accounts as a result of investment distributions are given as examples of events that may influence the 30 June balance you report when you prepare the MCS often four months later. However these are examples to demonstrate broad principles and we have not prescribed a single methodology for determining the balance or value of an account. We have not been able to do so as the law (in relation to account consolidation, for example) does not prescribe a methodology and there are no well established, consistent conventions used across the industry.

You will have reported correctly if you establish any reasonable methodology for determining account balance appropriate in your particular circumstances. A reasonable methodology is one that seeks to provide your best estimate of the value of the member's interest on 30 June as it is reasonably available to you at the time the MCS is prepared.

You need to avoid where possible significant differences between:

the balance you report to us in the MCS, which your member will rely upon when viewing the information we display online, and

the balance reported in the member statement you provide to your member under the corporations law.

However, we recognise that in some circumstances differences may be unavoidable. For example, if the balance date for the member statement is not 30 June differences between the MCS and the member statement will be unavoidable.

Account balance for defined benefit interestsThe requirements in the MCS reporting specification recognise that for defined benefits products it may not be reasonable to report any amount in Account balance. Even if an amount is to be reported, you do not need to reflect the full value of the member's defined

benefit interest on 30 June. Instead, you may choose to report another lesser amount, but only if it is an amount relevant to the defined benefit calculation and it is reported directly to the member.

Negative account balancesYou cannot report negative balances as the specification requires it to be a numeric field that cannot contain a negative sign. If your accounting systems record a negative balance, you need to ensure that your reporting systems provide a zero balance on the MCS.

Zero account balancesGenerally you won't need to provide an MCS for accounts with a zero balance throughout the year. However, note it's not the balance of an account that actually determines whether you have an obligation to give an MCS for a particular member – it’s whether that member held an interest in the fund at any time during the financial year (see The members to be reported.

For example, a person who becomes entitled to life and disability cover upon becoming a member of a super fund under the terms of that fund's trust deed has an interest in the fund despite the fact that their sponsor employer has not yet made contributions for them. An MCS reporting the various attributes of the account must be provided for this member despite the account's zero balance.

Similarly, an insurance-only interest may be attached to an account into which contributions are made quarterly but are immediately consumed by equivalent premiums paid to an insurer. In this case, the account will have a zero balance at 30 June but must nevertheless be reported on an MCS.

Conversely, where no insurance interest exists, an account with a zero balance may simply be set up in anticipation of future contributions that are not made before the end of the reporting period. An MCS is not required by the legislation for these zero balance accounts.

If your systems cause an MCS to be lodged for individuals in circumstances where no statement is required by law, there will be no impact for us but you may need to check that your fund is not breaching privacy laws or other obligations to your members about release of their personal information.

Consider whether you should be maintaining zero balance accounts. MySuper fees rules help protect members from unnecessary fees and charges.