ASFA questions Stronger Super costs

The SuperStream initiatives contained in the Government’s Stronger Super legislation could cost in the order of $10 per year per superannuation account, according to the Association of Superannuation Funds of Australia (ASFA).

In a submission to the Parliamentary Joint Committee reviewing the Stronger Super legislation, ASFA has expressed concern at the size of a levy to be imposed on superannuation funds to finance the Australian Taxation Office’s (ATO’s) implementation of the Stronger Super changes and the manner in which the money will be spent.

“The levy for APRA (Australian Prudential Regulation Authority) regulated superannuation funds in 2011-12 totalled $46.8 million.

If the Bill is passed the total levy likely to be proposed for 2012-13 (including the new money for the ATO) could be four times that,” the submission said.

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The ASFA submission said superannuation funds “are deeply concerned about how such an increased levy will impact on members’ accounts”.

“The feedback ASFA has received is that the impact will be more like $10 a year per affected account, rather than the $4 an account mentioned in the Explanatory Memorandum,” it said.

“The reason for this is that there are some millions of accounts in Eligible Rollover Funds, exempt public sector accounts, self-managed superannuation funds and accounts subject to the member benefit protection due to low balance.”

The ASFA submission also raised the question of whether ATO expenditures of the order proposed were justified on cost benefit grounds.

“Any additional costs to funds need to be considered in the context of possible future efficiency savings,” the submission said.

“The latest fund expense figures provided to ASFA by Rice Warner indicate that in 2010-11 the total cost to APRA-regulated funds for processing contributions was $230 million, with a further $145 million for benefit processing.

“A 50 per cent reduction in both (which could be on the optimistic side) gives a $190 million or so a year figure for cost savings to funds,” it said.

“The median cost per active member of contribution processing for active members (about a third of total member accounts) was $16. The APRA levy in regard to SuperStream ATO expenses proposed in 2012-13 would be around $12 per active account. Over all accounts, the figures are contribution processing costs of around $5 an account and an APRA levy of $4 for ATO costs.

“The cost benefit ratio of the ATO expenditure and required fund expenditure on the face of it would be unlikely to pass any usual private or public sector benchmarks,” the ASFA submission said.