The ATO has recently announced new reporting obligations for SMSFs as a result of the Transfer Balance Cap (TBC) regime. This will assist the ATO in tracking your TBC and administer the tax consequences if you exceed your $1.6 million TBC.
What events need to be reported?
You must report events that affects a SMSF member’s Transfer Balance Account (TBA), including:
- Existing pensions that continue post 1 July 2017
- Commencement of a new pension from 1 July 2017
- Commutation of a pension (either as lump sum payout or back into accumulation)
- Some Limited Recourse Borrowing Arrangement payments
- Structured settlement contributions received on or after 1 July 2017
What events are excluded?
Events not required to be reported include:
- Pension payments
- Investment earnings or losses
You do not need to report events for members who only have an accumulation balance in the SMSF, as generally reporting is only required at the pension level.
When do these events need to be reported?
It depends on whether your SMSF has one or more members with a Total Superannuation Balance (TSB) of $1 million or greater as at 30 June 2017. Remember your TSB includes all of your super accounts both in the SMSF and other super funds.
If your SMSF does have one or more members with a TSB of $1 million or greater:
- Report all existing pensions by 1 July 2018
- All other listed events within 28 days of the end the quarter the event occurred
SMSFs with member balances under $1 million continue to report events at the same time they lodge their SMSF Annual Return.
How do these events need to be reported?
You can report an event to the ATO via lodgement of a Transfer Balance Account Report (TBAR).
TBARs can be lodged via:
- Bulk data exchange
- An online form
- A paper form
For our SMSF clients we will be providing this service as part of our standard administration offering.
Valuation of new income streams
The ATO expects SMSFs to prepare a reasonable estimate of a member’s pension value at commencement. As part of the ATO’s Valuation Guidelines you should seek to revalue all the SMSF’s assets to market valuation and prepare interim financial reports to calculate the member’s balance at the pension commencement date.
What are the penalties for not reporting?
The ATO may impose a penalty if your fail to lodge a TBAR on time. Currently, that penalty would $1,050 for every quarter the TBAR is outstanding.
Potential adverse consequences of deferred reporting
For SMSF members who also have balances in other super funds, you will want to ensure that any rollovers, pension commencements or commutations are reported immediately, otherwise you may find the ATO ‘double counting’ certain events – resulting in an excess TBC assessment to you.
This is especially true where you believe you are close to and/or will exceed your $1.6 million TBC.
Remember, the excess TBC assessment continues to accrue until the excess pension balance is removed, and a relaxed approach to your SMSF reporting obligations may see you pay significantly higher tax then you would have had to if the reporting was completed at the time of the event.
How can we help?
If you would like to how this will affect your SMSF Administration, please contact us via email@example.com.
Jason is able to provide you with personalised financial advice about Superannuation & Retirement Planning through his Australian Financial Services License with Three Chairs Financial Services.
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The information contained in this article is general in nature and does not take into account your personal situation or objectives. You should not act on this information in any way before seeking professional advice.