By David Henriksen
06 December 2018
SMSFs now need to comply with new reporting requirements imposed as a result of legislative changes that came into effect from 1 July 2017.
These new reporting requirements are referred to as Transfer Balance Account Reporting (TBAR) and require some SMSFs to report events during the financial year instead of waiting until the SMSF lodges its annual tax return for that financial year.
From 1 July 2018, some SMSFs are required to now report events on a quarterly basis within 28 days of the end of each quarter (28th October 2018 being the first date for quarterly reporting). An SMSF is required to report on a quarterly basis or annual basis and in some instances, there are special events that need to be carried out within 10 business days after the end of the month the event occurred in or 60 days from the date of a commutation notice being issued.
If available, reportable events are missed or the opportunity to report an event differently is missed, it could result in a negative outcome for the SMSF. There could be missed strategic opportunities for the SMSF to minimise income tax, start further pensions in the future or allocate more of a deceased pension as a death benefit to their surviving spouse.
What Events Do You Need to Report?
An SMSF must report events that affect a member's transfer balance, including:
- Details of pre-existing income streams (including value and type) being received on 30 June 2017 that:
- Continue to be paid to them on or after 1 July 2017
- Were in retirement phase on or after 1 July 2017;
- Details of the new retirement phase and death benefit income streams including value and type (when a death benefit income stream is reversionary, the start date will be the date on which the member died);
- Details of limited recourse borrowing arrangement (LRBA) payments (including the value and date of each relevant payment) if the LRBA was entered into on or after 1 July 2017 (or a pre-existing LRBA was re-financed on or after 1 July 2017) and the payment results in an increase in the value of the member's interest that supports their retirement phase income stream;
- Compliance with a commutation authority issued by the Commissioner;
- Details (including value) of personal injury (structured settlement) contributions; and
- Details (including value) of commutations of retirement phase income streams that occur on or after 1 July 2017.
Some Exclusions from Reporting
Events that an SMSF does not need to report include:
- Any pension payments made on or after 1 July 2017;
- Investment earnings and losses that occurred on or after 1 July 2017;
- When an income stream ceases because the interest has been exhausted;
- The death of a member;
- Information that individuals report to us directly using a Transfer balance event notification form (NAT 74919). Typically, this is when the following events occur
- Family law payment split
- Debit event from fraud, dishonesty, or bankruptcy
- Structured settlement contributions made before 1 July 2007; and
- Information other funds will report to us, such as a member's interest in an APRA fund.
The main message is, talk to your financial adviser or SMSF accountant whenever you plan to make a significant change, take a benefit payment above minimum pension requirements or make a large transaction in your SMSF as there may be new reporting requirements that need to be covered. Also, there may be instances where the transaction could be carried out in a different way that is then reported under TBAR to allow more strategic opportunities in the future.