In the year since event-based reporting (EBR) started for SMSFs (from 1 July 2018) the ATO says an unprecedented number of transfer balance cap reports have required re-reporting.
The transfer balance account report (TBAR) is used to report certain events and is separate from the SMSF annual return. The TBAR enables the ATO to record and track an individual’s balance for both their transfer balance cap and total superannuation balance.
The ATO says the regulations in place do not provide it with a discretion for “special circumstances” regarding contraventions of the transfer balance cap, and that it is particularly important for all SMSF trustees and members to self-monitor and ensure that no member exceeds the cap.
The re-reporting incidents, says the ATO, has mostly been in response to determinations and commutation authorities it has issued. It says that in some instances the amended reporting indicates:
- the member was not actually receiving a pension during 2017-18
- the pension was commuted on 1 July 2017 so that the member was never in excess
- the member had commuted the pension before 1 July 2017 to avoid being in excess, and the trustees had incorrectly included the commuted amount in their original reporting
- the member commenced a pension during 2017-18, however the initial value reported to the ATO was amended so that the individual no longer exceeded their transfer balance cap.
The amended reporting usually results in the determination or commutation authority being
revoked. ATO records show that approximately 39% of commutation authorities issued to SMSFs in the
12 months since were revoked, including commutation authorities issued to APRA funds after SMSFs had corrected reporting errors.
What to carefully check
Due to the large number of amended TBARs it is receiving for SMSFs, the ATO is reminding SMSFs that it is important to check the following in the case where a member received a pension during an income year:
- that an appropriate condition of release was met
- that the pension is valued correctly in financial statements
- the commencement date of the pension and any commutations have been properly documented
- exempt current pension income (ECPI) has been correctly calculated with respect to the pension and any commutations that occurred during the year have been considered
- the payments from the pension have actually been paid
- the minimum pension payment requirements have been met.
The ATO has also announced that any TBAR re-reporting by SMSF trustees for future income years will be closely monitored, and that it may request evidence of relevant documents and calculations to substantiate the TBAR amendment.
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