Bank deadlines throw up super hurdles

Who receives the interest accruing on this money ...?

Falling on a Sunday, the end of the 2012-13 tax year complicated life for small business people and other unsupported taxpayers wanting to claim an end-of-year superannuation tax deduction. Unless these taxpayers were aware of the cut-off dates for their super fund to accept contributions, they faced serious complications in ensuring their eligibility for a tax deduction in 2012-13.

The tax deduction has value only after the end of the tax year when the tax return is submitted, so many taxpayers with cash flow problems or debts seek to make their deductible contributions as late as possible in the tax year.

This year, however, the end of the financial year fell much earlier than many people could reasonably expect. Australian Super, for instance, was prepared to accept payments via cash and cheque if delivered in person up until 2.30pm on Friday, June 28. That deadline provided a genuine service to investors allowing the superannuation fund to bank the proceeds on that date. Investors could be in no doubt that the contributions were received and banked that afternoon well before the end of the tax year.

But in this day and age, contributors could reasonably expect that electronic funds transfers would be more efficient and be able to be processed more quickly than cash and cheque deposits. Surprisingly, the deadlines of many funds for electronic transfers were much earlier: Australian Super's cut-off for direct debit contributions was 5pm on June 21, and for BPAY and electronic fund transfers, three days later at 5pm on Monday June 24.

Asset Check inquiries as to why these deadlines were so far before the end of the financial year revealed that just like individual customers, even our largest super funds are captives of the fund transfer arrangements in our banking system.

Even if it's reasonable to allow our banks' computers to rest on Saturdays and Sundays, it's difficult to understand why there's a four-day delay in the proceeds of electronic fund transfers being deposited in a superannuation member's account. Who receives the interest accruing on this money over the period of transfer?

More important are the problems for contributors not properly informed about the cut-off dates for making contributions. Even when the fund provides the option of receiving cash or cheque on the final business day of the year, rural and many city residents aren't able to make their contributions in person.

For obvious reasons, funds are not prepared to guarantee they will accept contributions via cheques sent by mail in the relevant financial year. All things considered, there's room for improvement in the operation of our financial system, including to ensure the overnight transfer of electronic superannuation contributions.

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Daryl Dixon

Executive Chairman

Daryl Dixon is one of Australia’s foremost investment experts and a well known writer and consultant. He has provided trusted advice to thousands of personal clients over more than 25 years and is an acknowledged expert in the areas of tax, superannuation (including public sector superannuation), social security and investments.

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