New SBSCH Bank Account Validation for SMSFs
With the continued year-on-year growth in the number of self-managed super funds (SMSFs) in Australia, the ATO has introduced an additional security feature for SMSFs that receive contributions through the Small Business Superannuation Clearing House (SBSCH).
This enhancement focuses on validating SMSF bank account details to help reduce fraud and ensure superannuation contributions are paid to the correct fund.
What Is the Small Business Superannuation Clearing House
The SBSCH is a free, online superannuation payment service provided by the ATO. It allows eligible small businesses to make super contributions for employees through a single transaction.
Eligibility for SBSCH
The service is available to:
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Small businesses with 19 or fewer employees
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Businesses with an annual aggregated turnover of less than $10 million
How the SBSCH Works
The SBSCH forms part of ATO online services and helps employers meet their superannuation guarantee obligations efficiently.
Employers make one electronic payment to the SBSCH, which then distributes the appropriate amounts to each employee’s nominated super fund or SMSF. This reduces administrative effort and paperwork when employees use different super funds.
New Bank Account Validation Feature
Rollout Timing
The new security feature was expected to roll out around 15 March 2024.
How the Validation Works
Under the new process, the SBSCH will check whether an employee’s SMSF bank account details match the bank account information held on the SMSF’s official records.
If there is a mismatch, or if no bank account details are listed, the employer will receive an “invalid super fund bank details” error message when submitting payment instructions.
Where this error occurs, the SBSCH cannot accept super contributions for that SMSF until the issue is resolved.
What Employers Need to Do
If an employer receives an invalid bank details error, the ATO recommends the following steps.
Confirm Details With the Employee
Employers should ask the affected employee to confirm that their SMSF bank account details exactly match those recorded for the fund.
Updating Incorrect or Missing Details
If the details are incorrect or missing, the employee should contact:
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The trustee of their SMSF, or
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The tax professional associated with the fund
The correct bank account details must be updated through ATO online services.
Once the discrepancy is resolved, employers can update the employee’s SMSF bank details in the SBSCH and resubmit the payment instruction.
Avoiding Delays for Other Employees
The ATO has confirmed that employers can still submit SBSCH payment instructions for other employees whose super fund details are valid, even if one employee’s SMSF details are under review.
What SMSF Members Should Do
Employees who are members of SMSFs are encouraged to proactively check that their fund’s bank account details are accurate and up to date ahead of the change. Doing so will help prevent delays in receiving employer super contributions.
Broader ATO Security Measures for SMSFs
The SBSCH bank account validation is part of a broader suite of security measures introduced by the ATO to protect SMSF retirement savings from fraud and misconduct.
Rollover Alerts
The ATO has begun issuing rollover alerts to SMSF members when a super fund uses the SMSF verification service to confirm fund details for the purpose of rolling benefits into an SMSF. These alerts help members identify and stop unauthorised rollovers.
SMSF Change Alerts
Additional alerts have also been introduced to notify taxpayers of changes made to existing SMSFs. These measures are designed to prevent fraudulent use of taxpayer information to establish SMSFs that may then be used for illegal early release or other offences.
What to Do If You Receive an ATO Alert
If you receive an alert from the ATO about a change to an existing SMSF, you should first contact the trustees or the tax professional associated with the fund to verify the change.
If it is confirmed that the change was incorrect or unauthorised, you should contact the ATO immediately so the issue can be addressed as quickly as possible.
Key Takeaway
The introduction of bank account validation for SMSFs using the SBSCH adds an important layer of protection for superannuation contributions. Employers and SMSF members should ensure fund details are accurate and current to avoid payment delays and help safeguard retirement savings.
Speak to one of our accountants if you have any questions about the changes in tax for 2023.
