Don’t fall for the TBAR false sense of security

Ever since the Turnbull government handed down its bombshell superannuation reforms on 3 May 2016 as part of that year’s budget, we’ve all been hoping the implementation of some of the measures would end up a little less complicated than initial assessments had predicted.

So when the ATO made some concessions to the SMSF community with regard to the transfer balance account report, or TBAR, requirements it was welcomed with open arms.

In the lead-up to the announcement there had been speculation the TBAR rules for all SMSFs would be quite onerous, that is, requiring more frequent reporting, eventually leading to real-time reporting, with a resultant greater administrative burden for the sector and increased operating costs.

Instead, the tax office seems to have heeded a lot of the industry feedback and gone easy, or at least easier, on SMSFs, in particular those funds with smaller asset balances.

So the solution, for now, will see funds in pension phase with members who have a total superannuation balance of less than $1 million having to report events affecting the fund’s transfer balance account or accounts once a year as part of the annual return.

SMSFs in pension phase with at least one member with a total super balance of $1 million or more, on the other hand, will be required to report events affecting the fund’s transfer balance account or accounts on a quarterly basis and within 28 days of the end of the month in which the relevant event took place.

On the surface it all seems pretty straightforward and to be fair these rules have saved the majority of funds the impost of a significant increase in administrative obligations.

But as we should all know by now, anything associated with the super reforms comes with a layer of complexity or murkiness when implementation is considered and this new reporting regime is no different.

It would be natural for many trustees and their advisers to assume the total super balance determining the frequency of the TBAR requirement was that of the member who is or already has commenced a pension.

But no, the frequency of a fund’s TBAR is decided after an assessment of the total super balance for each individual SMSF member. If one member has a total super balance of $1 million or more, separate from the member in pension phase, then the fund has to use the quarterly reporting regime.

This process to me seems a little convoluted as it is almost like a mishmash of thresholds and approaches. I have absolutely no doubt we will witness a lot of errors with the TBAR obligations on this score alone.

So there is a bit of a false sense of security within the existing rules trustees could easily fall into because they’ve been told how less vigorous the regime is.

Further, SMSF trustees should not necessarily get too carried away with the status quo. Right now the rules state if an SMSF is categorised as an annual reporter, then it will be able to report on an annual basis for the remainder of its existence.

However, the initial reporting regime was originally intended to act as a stepping stone to the adoption of a more real-time reporting framework.

Australian Prudential Regulation Authority-regulated funds already have to report on events affecting member transfer balance accounts within 10 days of the end of the month in which the event took place.

This, of course, is the regime the industry funds must adhere to. As such, if there is a change of government at the next federal election, get ready for further changes to bring SMSFs more into line with the remainder of the superannuation sector.

It’s another reason why the current SMSF TBAR requirements might be presenting a false sense of security.


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