With the 1 July 2017 introduction of the $1.6m Transfer Balance Cap (or “pension cap” as some people call it) came a new obligation on superannuation fund trustees to report certain member “events” to the ATO. These events are reported using a “Transfer Balance Account Report” or TBAR.
The TBAR is a way of reporting a number of things but mainly it is concerned with funds telling the ATO when:
- a new pension starts for someone who is retired or age 65 or over (or otherwise able to access their superannuation benefits without restriction),
- a transition to retirement pension becomes a retirement phase pension (because the recipient retires or reaches age 65 etc),
- some or all of an existing retirement phase pension stops (called a commutation), and
- some other special events that affect the Transfer Balance Cap,
and the amount involved.
For many SMSF members, the first TBAR lodged for them was to report the balance of any pensions already in place on 30 June 2017.
Will SMSFs need to lodge TBARs on an on-going basis?
For most SMSFs, no. For many funds, it is quite possible that no further TBARs will need to be lodged until say:
- a member dies and his or her pension is transferred to the surviving spouse, or
- the trustee decides to wind up the fund and transfer the remaining member balances to a public fund.
This is because there is no need to lodge a TBAR to report for:
- pension payments, or
- payments from a member account that is not a retirement phase pension (eg a withdrawal from an accumulation account – money that has not been converted to a pension).
More regular TBARs will be required by some SMSF members. For example:
- those who had not yet started to draw a pension from their fund at 30 June 2017 but do so at a later stage,
- those who “stop & restart” or “re-set” their pension each year to combine it with new contributions made in the previous year (not possible for those members who have already fully utilised their $1.6m Transfer Balance Cap),
- those who are drawing a transition to retirement pension and reach age 65 or retire etc after 30 June 2017, and
- those who take payments known as partial commutations (where part of the pension is withdrawn as a lump sum rather than a pension payment). This might be common in the future as a partial commutation reduces the amount counted towards an individual’s Transfer Balance Cap. Many people who will potentially inherit a superannuation pension from their spouse in the future will take partial commutations rather than larger pension payments to make sure they have as much of their cap available in the future.
In summary, whilst a great many SMSFs had to initially lodge TBARs (because members had pensions in place at the end of 30 June 2017), TBARs won’t be a major issue for most funds in most years in the future.