WHAT YOU NEED TO KNOW

The ATO has released information on what events SMSF must report by specific dates and what happens if reporting is late.

SOME OF THE EVENTS THAT NEED TO BE REPORTED

An SMSF must report events that affect a member’s transfer balance account.

Common events are:

details of when a member starts a retirement phase income stream, including death benefit income stream – details you need to provide include:

• type of income stream
• the value
• start date.

Where the death benefit income stream is paid to a reversionary beneficiary, the start date will be the date the member died, and the value will be the value of the income stream on the date of death of the member:

• details (including value) of communications of retirement phase income streams, including commutation that occurs before it is rolled to another fund.
• details of limited borrowings arrangement (LRBA) payments (including the value and date of each relevant payment) if the LRBA was entered into on or after 01 July 2017 (or a pre-existing LRBA) was re-financed on or after 01 July 2017) and the payment results in an increase in the value of the member’s interest that supports their retirement phase income stream.
• details (including value) of personal injury (structured settlement) contributions.
• Compliance with a commutation authority issued by the ATO.
  If no event happens, you don’t have to report.

SOME REPORTING EXCLUSION

Events an SMSF does not need to report on a transfer balance account report (TBAR) include:

• pension payment
• investment earnings and losses
• when an income stream ceases because the interest has been exhausted
• the death of a member
  
  Information that individuals report to the ATO directly using a Transfer balance event notification form (NAT 74919)
• this includes a
  Family law payment split
  Debit event from fraud, dishonesty, or bankruptcy
  Structured settlement contribution made before 01 July 2017.

WHEN IS REPORTING REQUIRED

All SMSFs must report events that affect their members’ transfer balances. Due dates will depend on their total super balance until 30 June 2023. However, some events will require you to report sooner being:

a voluntary member commutation of an income stream in response to an excess transfer balance (ETB) determination – this must be reported within TEN (10) business days after the end of the month in which the commutation occurs
responses to commutation authorities’ communications must be reported within SIXTY (60) days of the date the commutation authority notice was issued.

You can find more guidance in the Law Companion Ruling LCR2016/9 Superannuation reform transfer balance cap.

UNTIL 30 JUNE 2013

Due dates for transfer balance event reporting are determined by the total super balance of an SMSF’s members,

For a total balance of $1 million or more

If the total balance of any of your members was $1 million or more on 30 June, the year before the first member starts their retirement phase income stream, you must report quarterly.

For a total balance of less than $1 million

If the total balance was less than $1 million, you can report annually at the same time you lodge your SMSF annual return.

FROM 01 JULY 2023

All SMSFs will be required to report quarterly, even if the members’ total super balance is less than $1 million, which means TWENTY-EIGHT (28) days after the end of the quarter in which the event occurs.

CONSEQUENCES OF LATE REPORTING

If an SMSF does not lodge a TBAR by the required date, the member’s transfer balance account will be adversely affected:

They may need to commute more money to rectify any excess and pay excess transfer balance tax
An SMSF may be subject to compliance action and penalties if they fail to lodge or loge late
Noncompliance may result in denial of exempt current pension income (ECPI) claims.

VALUING ASSETS FOR REPORTING

In line with ATO valuation guidelines for SMSFs, the trustee may choose to use a reasonable estimate of the value of an income stream to meet their TBAR obligations. This usually occurs when the member starts a pension partway through the year.

The ATO expects that, as part of choosing to start a pension, an individual will have a reasonable estimate of the value of that pension. However, it may be wise to bring valuation practices forward in some instances.

If the trustee has used a reasonable estimate and the value of that income stream significantly changes, the trustee may correct the value initially reported to the ATO.

RECORD KEEPING

Trustees must ensure:
their TBAR reporting is true and correct
the commencement and commutation of retirement phase income streams are supported by contemporaneous fund records
payments to members have been correctly characterised at the time the payment was requested so trustees and auditors can ensure the minimum pension payment standards have been met (this is especially important where pension payments have been made from an income stream that has also been commuted in full or in part during the year)
their TBAR reporting for the commencement and commutation of retirement phase income streams also aligns with their ECPI claim for a year
relevant documentation is passed on to their auditor.

AMENDED REPORTING

TBAR re-reporting by SMSF trustees will be monitored. In addition, the ATO may request evidence of relevant documentation and calculations to substantiate any TBAR amendment.

We encouraged you to report early to avoid any possible penalties.

As always, we encourage you to contact the team at ROSATI WANG Super with any queries or comments you may have regarding this or any other SMSF audit issue.