Under the new event based reporting rules which becomes effective on 1 July 2018, SMSFs that have members with total superannuation account balances of $1 million or more will be required to report events impacting members’ transfer balances quarterly to the Australian Taxation Office (“ATO”) and annually for members with less than $1 million.

The reporting of this information is done using the Transfer Balance Account Report (“TBAR”) form, separate to the SMSF annual return.

The TBAR allows the ATO to record and track a member’s:

  • $1.6 million transfer balance cap, and
  • total superannuation balance

To determine if the member is being paid a pension and whether the member is contributing too much into the member’s super fund and receiving tax benefits on funds to the member should not receive.

Therefore, TBAR reporting is only relevant for an SMSF where:

  • it has a member commencing a retirement phase pension, or
  • the fund has retirement phase pensions already in place.

For the first TBAR reporting obligation commencing on 1 July 2018, the SMSF trustee will need to report:

  • the value of pre-existing retirement phase pensions for the year ended 30 June 2017
  • any relevant impacts for an SMSF member from 1 July 2018
  • it has appropriately documented all income stream valuations and decisions for the 2017–18 year.

Common TBAR reporting events

An SMSF is required to report if one of its members has an event affecting the member’s TBC, including:

  • income streams a member was receiving just before 1 July 2017 that continue to be paid to them on or after 1 July 2017 and the member is in the retirement phase
  • starting a new retirement phase income streams, including reversionary income streams
  • Account Based Pension and Transition to Retirement Income Streams where the member has satisfied a condition of release
  • cessation of an income stream
  • pension commutation of retirement phase income streams
  • certain limited recourse borrowing loan capital repayments that would cause accumulation interests to fall and pension interests to increase
  • Commissioner Commutation Authority actions, including commuted in full and unable to commute
  • personal injury (structured settlement) contributions received after 1 July 2017
  • child death benefit income streams (including reversionary death benefit income streams)
  • rollover of a member’s pension from the member’s  SMSFs to an APRA-regulated fund
  • super income streams that stop being in the retirement phase, eg, the trustee failed to meet the minimum pension payment standards for an income stream.

TBAR reporting exclusions

The following events do not need to be reported on TBAR:

  • pension payments
  • investment earnings or losses
  • when assets supporting an income stream are exhausted
  • the death of a member
  • information that individuals report to the ATO directly using a Transfer balance event notification form. This is generally when the following events occur:
    • family law payment split
    • debit event from fraud, dishonesty, or bankruptcy
    • structured settlement contributions made before 1 July 2007.

TBAR reporting options

There will be three methods to lodge a TBAR report, they are:

  1. paper form,
  2. ATO online lodgement, and
  3. bulk data exchange via the Business portal.

Processing time for TBARs and reporting mismatch

The ATO can take more than 28 days to process SMSF TBAR forms after lodgement.

Based on ATO data, of the 1.1 million SMSFs members, 400,000 of them also have an interest in an APRA regulated fund.

As APRA regulated funds have different and more frequent TBAR reporting than SMSFs, the ATO has reported at least two instances of double counting a member’s transfer balance account due to the mismatch in reporting between SMSFs and APRA funds.

For example, when an SMSF rolls over a member’s pension account to an APRA fund and starts an income stream, this could result in double counting of the same pension amount because the SMSF has not yet report a debit to the account on transfer while the APRA fund has reported the corresponding credit.

This timing mismatch in reporting results in the ATO issuing an Excess Transfer Balance (“ETB”) determination letter, instructing the APRA fund to commute the “excess”, despite the ETB is in fact incorrect. However, due to the reporting mismatch, the ATO may not be able to verify the mistake or identify whether the reported figures were debits or credits against the member’s total superannuation balance.

To avoid an  incorrect ETB being issued by the ATO and the time spent later correcting this error, the SMSF should lodge the TBAR for the rollover ASAP and no later than when the APRA fund lodges the TBAR for starting the new pension.

This article was co-authored by Bill Leung, HLB Mann Judd Melbourne