From 1 July 2017 superannuation fund members are subject to a $1.6 million transfer balance cap (TBC) which limits the tax exemption for assets funding superannuation pensions.

To support the introduction of the TBC, commencing from 1 July 2018, SMSFs will be required to report events which impact on a member’s transfer balance account (TBA).

This reporting is required to assist trustees, their advisors and the Australian Tax Office (ATO) to track an individual’s TBA and total super balance (TSB) in order to administer the tax consequences if the individual’s TBC is exceeded.

If an SMSF member had a pre-existing income stream, it must be reported to the ATO on the Transfer Balance Account Report (TBAR) on or before 1 July 2018. A pre-existing income stream is an income stream the member was receiving on 30 June 2017 that:

• continued to be paid to them on or after 1 July 2017, and
• is in retirement phase.

Relaxed reporting rules apply to SMSFs where all its members’ balances are under $1 million.  This reflects the position that members with a balance of under $1 million are less likely to breach the $1.6 million TBC in the relevant financial year.

From 1 July 2018, SMSFs with members who all have a balance less than $1 million will only need to report events annually.  This will be at the same time the annual SMSF return is due, noting that TBA events need to be reported on a separate form to the SMSF annual return.

For SMSFs with at least one member who has a TSB of $1 million or more, trustees will need to report events affecting all members’ transfer balances within 28 days after the end of the quarter in which the event occurs.

Trustees will only need to start reporting when the first member starts a retirement phase income stream.  To work out if the quarterly or annual arrangements apply, a trustee will need to understand the TSB of all of its members at the later of:

• 30 June 2017 if a member had a pre-existing income stream or where the first member starts their first retirement phase income stream during the 2017–18 year.
• 30 June the year before the first member starts their first retirement phase income stream.

For example, if one or more SMSF members enter into retirement phase for the first time after 1 July 2018, the TSB is determined on the 30 June immediately before the start of an income year, i.e. 30 June 2018.

Once the reporting framework is set, trustees will not move between annual and quarterly reporting due dates, regardless of fluctuations to any of its members’ balances.

Even where an SMSF has only one member with an individual total superannuation balance of $1 million or more, it must report all events for all members within 28 days after the end of the relevant quarter, even if the balance of the first member to start a retirement phase income stream is below $1 million.

The ATO estimates that up to 85 per cent of the SMSF population will not be required to undertake any additional reporting outside of the current annual reporting time frames for the foreseeable future.

The reason for this estimate is not only the relaxed reporting rules, but also that a fund is only required to lodge a report once a member starts a retirement phase income stream and subsequent reports are only required if one of its members has an event that impacts their TBA.

A trustee is required to report earlier if a member has exceeded their transfer balance cap. An SMSF can choose to report events as they occur and in some instances are encouraged to do so to avoid incorrect excess transfer balance determinations issuing. Click here for more information on Transfer Balance Accounts.

The ATO advises that as there are no ‘special circumstances’ discretion for contraventions of the TBC and therefore it is particularly important for all SMSF members to self-monitor and ensure they are meeting their responsibilities as trustees.  View more information on SMSF trustee responsibilities in the Trustee Knowledge Centre’s Video Library here.

This is also timely reminder that as trustees you have a responsibility to ensure proper and accurate tax and super records are kept. Record keeping requirements also ensure certain records need to be kept for 5 or 10 years. Ensure your SMSF records comply with the superannuation laws here.

How do I report via TBAR?

Trustees can lodge a TBAR to report information to the ATO by completing the online form or mailing a paper report.

If you are seeking assistance from a professional advisor to lodge a TBAR, they are able to lodge via their business or tax agent portal.  While members will be able to view their transfer balance account via myGov.gov.au, this information is not yet available to professional advisors.   In the short term you can download and print your TBA this information for your advisors information. Click here, for a detailed factsheet on Transfer Balance Account Reporting.