Member verification question to eliminate bulk of contribution errors, says ATO

An updated super guarantee charge will apply where employers fail to pay contributions in full, on time and to the right fund.

Shane Moore, a project director for payday super at the ATO, said this would drive more regular payment flows and much tighter reconciliation expectations for funds.

Speaking in a recent ATO webcast, Moore explained that while there were extended due dates that apply to new employees or when there's a change of funds, there would generally be little wiggle room for delays, with only seven days to make a contribution to a super fund.

For new employees or where there's a change of funds, employers will have 20 business days to get that contribution to their fund, the ATO said.

"Everything needs to move faster to give employers as much time as possible and have time to fix mistakes that can occur before it's too late," he said.

Under the changes, funds will be required to allocate or return an unallocated contribution within three business days, down from the current 20-day timeline.

"This is a major change for funds. They'll need to have faster internal workflows, faster matching processes and faster error handling," Moore said.

"In getting ready for Payday Super, the ATO has been consulting through our Technical Working Group to identify key improvements to SuperStream that both minimise, build complexity and deliver meaningful enhancements and efficiencies to the contributions process for both employers and super funds."

Moore said that updates to the SuperStream system would help reduce common errors and improve the speed and integrity of data and payments.

Under the current regime, Moore noted that a fund will have 20 business days to try to match a payment to a member's account.

"Once it's allocated, it's then reported to the ATO via MATS. Where it cannot be matched to a member's account, the employer is contacted within five business days, and the employer then has ten business days to provide further information," he said.

"If the funds still can't allocate their contribution, it's then refunded to the employer within 20 business days from the date it was received."

Under the new changes, funds will only have three days to allocate or return an unallocated contribution, he explained.

The ATO estimated that, currently, there were approximately 200 million employer contributions per year. Of those contributions, Moore said there were around 4 million errors returned to employers. Three million of those errors were information or warnings, meaning those contributions have been allocated after that effort.

"Now, 1 million of those contributions are rejected back to the employer with a payment. While this number appears low at 0.5 per cent of contributions being rejected, this is still money not making it to a member's account and needing corrective action by an employer," Moore said.

When the superannuation system moves to the new regime, the ATO estimated that the number of contributions would increase to 500 million per year. Funds will also only have three days to try to match contributions to an existing account.

"This will mean there are more errors as funds will have less time. Now, if this error rate increased to 5 per cent, that would roughly amount to 25 million rejected contributions."

"That's a significant amount of money not making it to members' accounts and a significant effort for employers."

Moore said the SuperStream Technical Working Group is focused on three key changes to minimise the rate of errors in contributions.

The ability of funds to accept near-real payments via the new payments platform (NPP) is a critical change to enable faster inbound payments and support faster reconciliation, he said.

Another important change was to provide clearer, richer, more actionable error messages.

Moore said that at the moment, contribution transaction error responses could be vague or misunderstood, ignored, or not received by employers.

Under new upgrades, error messaging will include standardising codes and descriptions to ensure consistency and reliability, he said.

"They'll be more structured, more descriptive and designed to help employers fix errors faster. It will be an additional requirement that error messages must be validated before they are sent to the employer."

Another change that will significantly benefit employers and funds is member verification requests (MVRs), Moore added.

"The MVR allows an employer to verify whether a fund can accept a superannuation contribution for a particular employee. This will result in fewer errors in the processing of contributions that exist in their current state and improved straight-through processing," he said.

"Employers will be able to verify with a fund, that an employee account still exists, and can confirm fund and member details, check account validity, and is able to accept contributions and reduce rejected contributions before the employer has made that contribution."

Early testing and clearinghouse analysis have suggested that the MVR could prevent 90 per cent of the common errors that happen today, according to the Tax Office.

"That means fewer manual exceptions, faster straight-through processing, and less refunds that funds have to process and return to employers," he said.

The ATO stressed the importance of super funds understanding the changes they need to consider and planning now to reduce the compliance risk for the fund and also smooth the transition for employers.

Moore warned super funds that if they hadn't already started reviewing their current processes to implement the changes, they were already behind.

"We've heard that the majority of funds will be ready close to the 1st of July 2026, and there is an importance here that all funds begin getting ready as soon as possible. That can't be stressed enough."