So, there has been a lot of talk around the new quarterly reporting obligations for SMSFs – what is it all about, how to report and what to report? So many questions asked, so here is a guide explaining all we need to know.

The ATO introduced new reporting obligations for SMSFs as a result of the introduction of the transfer balance cap (TBC). Effective 1 July 2018, SMSFs will be required to report events on a quarterly basis to the ATO where an SMSF has a member with a total superannuation balance of $1 million or more. This event-based reporting model only applies to the transfer balance cap, and only relates to events affecting an individual’s member’s transfer balance where an SMSF has one or more members in pension phase. You do not need to report if your fund does not have a member in pension phase.

So what events are required to be reported?

Simply put an SMSF only reports to the ATO if one of its members has an event that impacts on their Transfer Balance Cap. Reporting will generally impact at the income level stage therefore if a member has multiple income streams, reporting will be based on the value and account details on each of those income streams.

So, what is required to be reported to the ATO:

  • Pension commutations
  • Commencement of any new superannuation income streams
  • Cessation of any superannuation income streams
  • Structured settlement contributions received on or after 1 July 2017
  • Value of existing superannuation income streams as at 30 June 2017 (& in most cases up until 1 July 2018)

SMSFs with only accumulation balances in the fund are not required to report any transfer balance events, other than structured settlement contributions until a superannuation income stream commences. It is important to note that these new obligations only relate to changes in the transfer balance therefore it is imperative that SMSF trustee track a member’s transfer balance on an ongoing and continuous basis.

How to value new income streams?

Generally, any new income streams commenced during a financial year are valued as part of the fund’s end of year financial accounts. So how do you report the value of any new income streams to the ATO as part of this new reporting regime? The ATO has confirmed that SMSFs can still apply ‘valuations guidelines for self-managed super funds’ which specify that: “it is accepted that a reasonable estimate of the value of the account balance can be used when a pension is started part way through the year”. The ATO therefore would accept a ‘reasonable estimate’ of the commencing value of any new income stream. This valuation is generally considered fair and reasonable when the following applies:

  • Capable of explanation to a third party
  • Has been undertaken in good faith
  • Takes into accounts all factors and considerations that may affect the value of the asset

How and when do these events need to be reported?

For all Accountants, that is the burning question – as this new reporting regime will affect many SMSFs in each firm. It basically comes down to what a member’s balance in their SMSF was at 30 June 2017 – if it was greater than $1 million reporting will be required. Any events that occur within each quarter will be required to be reported to the ATO within 28 days after the end of the specific quarter in which the event occurred.

Example: Reporting commutation post 30 June 2018

On 30 June 2018, Mary has a total superannuation balance of $1.2 million. On 20 September 2018, Mary starts an income stream valued at $1.2 million and has no other super interest. Over time the value of the income stream decreases to $800,000. On 3 March 2019 Mary commutes $100,000 from the income stream.

As Mary has a total superannuation balance of $1 million or more as at 30 June 2018, the SMSF is required to report any events 28 days after the end of the quarter in which the event occurs. The commencement of the income stream would need to be reported to the ATO no late than 28 October 2018. The commutation would need to be reported no late than 28 April 2018.

All super funds, including SMSFs will be required to report transfer balance cap (TBC) events via the TBAR, which can be submitted via one of the three following channels:

  • A paper form
  • An online form
  • Bulk data exchange

Thankfully, all three reporting channels are available to SMSFs – with bulk data exchange more suited to large providers whereas online forms will suit smaller providers.

Are there any penalties for not reporting?

Super funds that fail to report by the required date, a ‘failure to lodge’ penalty may be imposed by the ATO. This penalty is calculated at the rate of 1 penalty unit for each period of 28 days that the event remains unreported up to a maximum of 5 penalty units (currently 1 penalty units equates to $210).

If you have any questions relating to these new reporting regime, please contact Wayne Patten in our office on 5413 9300.