The timing of TBARs (Transfer Balance Account Reports) for SMSFs has been hotly debated ever since the ATO first flagged its view that this should occur outside the normal annual return cycle. The final verdict is now in.
The term “events based reporting” has been used to describe a more timely reporting regime for events such as starting pensions, commuting them (partially or fully), converting an existing transition to retirement pension to a retirement phase income stream, inheriting a reversionary pension and a variety of others. The deadlines initially proposed were 28 days after the end of the quarter or 10 days after the end of the month in which the event occurred depending on the nature of the event.
It would seem that significant pressure has resulted in a concession for SMSFs.. of sorts.
A recent ATO media release and subsequent webinars for SMSF professionals signals that:
- SMSFs in which all the members have total superannuation balances of less than $1m can report the new “events” with their annual return rather than when they occur; but
- All other SMSFs will need to report any event that affects their transfer balance (the balance that is checked against the new $1.6m limit) within 28 days after the end of the quarter in which the event occurs. (It seems that the proposal to have some events reported 10 days after the end of the month has been dropped for SMSFs.)
What’s tricky here? A few things:
- A fund is either in or out of the “28 day” events based reporting regime. So the fact that one member has more than $1m in superannuation will drag all other members into the regular reporting net. To provide some perspective here – remember that this reporting is only ever required when someone actually does something that affects their transfer balance account such as starting a new pension or stopping an old one. It is not necessarily something that funds will have to do very often.
- Whether a fund qualifies for the exemption from timely reporting depends on all the members total superannuation balances, not just the amounts they have in their SMSF. This will require knowledge of amounts that the administrator of the SMSF does not necessarily have easily available to them.
- When total superannuation balance is measured depends on whether or not a member was receiving a retirement phase pension from the fund just prior to 1 July 2017. If so, then the members’ total superannuation balance is measured at 30 June 2017. Otherwise, the members’ total superannuation balance is measured as at 30 June of the year immediately prior to the first pension for that fund commencing. Importantly, once a fund is determined to be an annual or quarterly reporter, the fund’s classification is fixed in place. Subsequent increases or decreases in the balances of the members will not result in a reclassification of the fund from quarterly to annual or vice versa.
- APRA funds will continue to have shorter timeframes and will be reporting events throughout the year. This will encourage SMSFs to voluntarily bring their reporting forward in cases where a member is transferring to an APRA fund. For example, imagine a single member fund with a $900k pension balance (let’s assume that $900k was reported to the ATO as at 1 July 2017 for this pension and the balance has stayed roughly the same ever since). The member decides to wind up the fund and transfer to an APRA fund in 2018/19. The APRA fund will report a new pension of $900k shortly after it starts. Unless the fund voluntarily reports the commutation in the SMSF early, the ATO will believe that the member has exceeded his or her cap by $200k and start issuing frightening notices immediately.
While this is a useful concession for some, we still believe a better approach would have been to allow all SMSFs to report in line with their annual return cycle with the ability to report early if they wanted to.