From 1 July 2023, the TBAR reporting for all SMSFs will be streamlined and all SMSFs will be required to report transfer balance account events no later than 28 days after the end of the quarter in which the event occurred.
Until 30 June 2023 the timeframes for transfer balance event reporting are determined by the total superannuation balances of an SMSF’s members, unless:
the member has exceeded their personal transfer balance cap, and
the member has been sent an excess transfer balance determination, or
their fund has been sent a commutation authority.
SMSFs that have any member with a total superannuation balance of $1 million or more on 30 June the year before the first member starts their first retirement phase income stream, must report events affecting members’ transfer balances within 28 days after the end of the quarter in which the event occurs.
From 1st July 2023, a member Total Super Balance will no longer be used to determine when an event should be reported, and the annual reporting option will be removed.
Some things to consider when it comes to TBAR reporting:
What needs to be reported
An SMSF needs to report events that affect a member’s transfer balance account. These events are:
Commencing a retirement phase income stream
Commutations of a retirement phase income stream
Compliance with a commutation authority issued by the ATO
There are other events that do not need to be reported including:
Pension Payments
Investment earnings
Cessation of an income stream once the interest has been exhausted
Death of a member
Early Reporting
An SMSF can and is encouraged to report TBAR event as they occur, earlier than required as it:
helps members manage their transfer balance account and avoid exceeding their personal transfer balance cap,
helps ensure the ATO’s calculation of a member’s personal transfer balance cap is based on full and accurate information, in particular for events that occur in the income year prior to indexation, and
avoids incorrect excess transfer balance determinations being issued.
Late Reporting
The ATO is currently taking an educative approach in instances where TBAR reporting is late. Reporting events late can have a significant adverse outcome for trustees of the SMSF such as the payment of excess transfer balance tax. The ATO have indicated that at some time in the future, an SMSF may be subject to compliance action and penalties for late reporting.
Record Keeping
When it comes to TBAR reporting, your clients have a number of obligations including:
ensuring the reporting is accurate,
commencement and commutation of income streams is evidenced by correctly prepared and executed documentation,
Payments to members are correctly categorised at the time of the payment, and
TBAR reporting aligns with exempt current pension income (ECPI) each year.
With the changes coming in July 2023, having the right systems in place, or partnering with an administrator that has, will be essential for getting it right. It can be a complex and sometimes overlooked area of managing an SMSF by Accountants and Advisers.