WHAT YOU NEED TO KNOW

The ATO has released updated guidance on the different methods for lodging a super transfer balance account report (TBAR) and how to correct one.

It includes information on the following:

What events must SMSFs report by certain dates

Valuing assets for reporting

Reporting methods and  lodgment

Reporting a reversionary income stream

Reporting an account as closed

Consequences of late reporting

Record keeping

Correcting a report

Amended reporting

BACKGROUND

From 1 July 2018, all SMSFs are required to report certain events to the ATO that affect their members’ transfer balance accounts.

Up to 30 June 2023

SMSFs must report transfer balance cap events on a quarterly or annual basis, depending on the size of the total superannuation balances of fund members (as explained below).

1. Quarterly reporter – SMSFs that have any members with a total superannuation balance of $1 million or more on 30 June of the year before the first member starts their first retirement phase income stream (RPIS) must report events affecting their members’ transfer balances within 28 days after the end of the quarter in which the event occurs.
2. Annual reporter – where all members of an SMSF have a total superannuation balance of less than $1 million, the SMSF can report this information at the same time that its SMSF annual tax return is due.

There are two exceptions to the general reporting timeframe:

1. Where a member of an SMSF is commuting a retirement phase income stream in response to an excess transfer balance determination. Where this is the case, the SMSF must report within ten business days after the end of the month in which the commutation occurs, and
2. Where a response to a commutation authority must be provided to the ATO. In this case, the SMSF must report within 60 days of the date the ATO issues the commutation authority.

FROM 2023-24 ONWARDS

From 1 July 2023, all SMSFs will be required to report quarterly, even if the member’s total superannuation balance is less than $1 million. This means SMSFs must report the event that affects the members’ transfer balance within 28 days after the end of the quarter in which the event occurs.

All unreported events before 30 September 2023 must be reported by 28 October 2023, meaning SMSFs cannot report at the same time as their SMSF annual return for the 2022–23 income year.

Furthermore, the obligation for SMSFs to report earlier will remain for:

• a commutation of a retirement phase income stream in response to an excess transfer balance determination (i.e., within ten business days after the end of the month in which the commutation occurred)
• responses to commutation authorities (i.e., must be reported by the legislated due date, as specified in the notice).

Suppose an individual who has exceeded their transfer balance cap is issued an excess transfer balance determination or commutation authority based on incomplete or incorrect information. In that case, the reporting must be corrected as soon as possible.

This enables the ATO to revoke the determination or commutation authority.

EVENTS SMSFs NEED TO REPORT

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

Common events are:

1. details of when a member starts a retirement phase income stream, including death benefit income streams – details to be provided 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:

1. details (including value) of commutations of retirement phase income streams, including commutation of a pension that occurs before it is rolled over to another fund.

Other events include:

1. details of limited recourse borrowing arrangement (LRBA) payments (including the value and date of each relevant payment) if the LRBA was entered into on or after 1 July 2017 (or a pre-existing LRBA was re-financed on or after 1 July 2017) and the payment results in an increase in the value of the member’s interest that supports their retirement phase income stream.
2. compliance with a commutation authority issued by the ATO.
3. details (including value) of personal injury (structured settlement) contributions.

If no event occurs, SMSFs have nothing to report.

The new TBAR timeframes will therefore be due from 1 July 2023 as follows:

ACTION ITEMS

Based on the current ATO guidance, the ATO will prioritise lodgment compliance over the absolute accuracy of the TBAR by emphasising the ability to correct minor errors after the lodgment of the initial TBAR.

If your firm is responsible for administering your clients’ SMSF lodgment obligations, informing them about these new reporting requirements is advisable. This ensures you receive the necessary information on time, allowing you to process the data, prepare and lodge the TBAR on time, and avoid late lodgment penalties.

For firms that have only dealt with annual reporting for their SMSF clients, it’s best practice to establish regular communication with these trustees to capture any reportable event by the end of the reportable quarter from now on.

WE’RE HERE TO HELP!

If you have any issues, questions or feedback regarding our monthly SMSF Bulletin or if you’d like clarification or further advice on the content of this month’s edition or any other SMSF audit concern – don’t hesitate to reach out to me at +61 416 123 446 or trosati@rosatiwang.com.