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ATO clarifies TBAR rules

Kasey Macfarlane

Kasey Macfarlane

ATO SMSF segment assistant commissioner Kasey Macfarlane has addressed industry confusion over what must be reported under the transfer balance account report (TBAR) regime, in addition to outlining potential risks around the 2018 transition date for SMSFs.

“Events-based reporting, as proposed by the ATO for transfer balance cap purposes, is only required where a member actually has a transfer balance cap debit or credit for a particular month, so whilst we say reporting is required 10 business days after the end of the month, that doesn’t mean every SMSF has to submit a report to us every month, it’s only after an event,” Macfarlane told the recent Class Connect 2017 conference in Sydney.

“In a number of cases, many SMSF members may only have one transfer balance cap debit or credit in the life of their fund, for example, they start an income stream, let it run and that’s it, so the only event they have to report under this model is the commencement of that income stream.

“SMSFs that do not have any members in retirement phase don’t have any additional reporting requirements beyond the current SMSF annual return lodgement.

“And most SMSFs don’t need to report anything further for transfer balance cap purposes until 1 July 2018 – I know leading up to 30 June 2017 [for the new super changes], a lot of people were concerned and thought they suddenly needed to report to us all their SMSF clients’ balances, but that is not the case.”

She outlined that transfer balance cap debits and credits did include the commencement of an income stream, other pensions received by individuals from a deceased spouse’s super account or a former spouse’s super account as part of a family law settlement, commutation of an income stream, and certain repayments of borrowings under limited recourse borrowing arrangements.

However, transfer balance cap debits and credits did not include investment income and gains, investment losses and pension payments.

Commenting on the TBAR transition period for SMSFs, Macfarlane said: “We do recognise and acknowledge that these arrangements are a significant change for SMSFs so there will be a transitional period allowed for SMSFs – they won’t generally have to commence TBAR reporting until 1 July 2018.

“However, I do want to note that TBAR reporting will be available for SMSFs from 1 October 2017 if they want to start earlier.

“I also want to highlight that whilst there is this deferred date for when SMSFs must commence TBAR, those who do defer until 1 July 2018 need to be aware of the risks for the individual member and trustee – they need to accept responsibility to track their position in relation to the transfer balance account otherwise there is a risk they inadvertently go over the cap and find themselves facing an excess transfer balance tax liability.

“And if they’re not tracking it and do go over, they may not be aware they need to take action and commute an amount to get back below the $1.6 million cap.”

She also stipulated that for SMSFs that commenced TBAR on 1 July 2018, past events could not be bundled up and reported as a single event, nor could events from multiple income streams as debits and credits must be reported separately per income stream.

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