ATO warned on STP unintended consequences

The Association of Superannuation Funds of Australia (ASFA) has counselled caution with respect to implementing single touch payroll (STP) arrangements and online choice of fund procedures, warning there is considerable scope for unintended consequences.

In a submission responding to an Australian Taxation Office (ATO) consultation paper on STP and online choice of fund design, ASFA has stated: “The ATO, and by extension the Government should not underestimate the potential for unintended consequences arising from the STP – new employee commencement processes described in this consultation paper”.

It said that by combining tax file number (TFN) withholding processes with superannuation choice processes through a third-party portal (the ATO), “there is a risk that the likelihood of improved experience and greater efficiency are low”.

“A breakdown in one part of the process could affect other parts which can be avoided as each process has different time dependencies,” the submission said. “The potential unintended consequence of greatest concern from ASFA’s viewpoint is the risk that this process results in a reduction of member engagement potentially leading to sub optimal retirement or insurance benefit outcomes.”

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The ASFA submission claimed that the ATO’s own usability testing had highlighted that understanding and engagement with superannuation was currently low and that individuals were likely to refer back to employers and family members for guidance.

“If the ATO process shortcuts these steps for individuals, as it is intended to do, opportunities will be missed to encourage individuals to properly assess existing superannuation accounts alongside new options that may be a greater benefit to them,” it said.

“The ATO process in isolation also has the potential to undermine the efforts and positive outcomes to date from the MySuper regime,” the submission said. “MySuper products by design and through more stringent prudential oversight are generally high quality, low cost, somewhat standardised products that individuals are allocated to if superannuation choice is not exercised. This protects the disengaged and should be fostered. Similarly, these processes may have detrimental effects on innovation in new product development and prolong moves to a lower cost, higher quality, more competitive environment.”

“As has been mentioned several times in our response, consumer and market impacts need to be tested before online choice services are provided by either the ATO or employers for use,” the ASFA submission said.