Transfer Balance Caps

What They Are And When To Report

Transactions are recorded based on the reporting of various events (refer below table). The most common being the commencement of retirement phase pensions and commutations from those pensions.

Debits (deacrease in a account balance) Credits (deacrease in a account balance)

Commutation of capital value of the pension (inpcludes partial lump sum payments)

Structured settlement value Commencement value of new retirement phase pension

Family Law payment splits Commencement of death benefit pensions

Losses due to fraud or bankcruptcy National earnings that accrue on excess balance

Reduction in defined pensions due to a change in circumstances

Currently, you could report either annually or quarterly with many reporting annually. For SMSF’s it would either be:

• Quarterly reporters – reporting of events required to be lodged within 28 days after the end of the quarter in which it occurs.

• Annual reporters – events to be reported no later than the lodgement of the SMSF’s Annual Return for the year in which the event occurs.

New Reporting laws

From 1 July 2023 the reporting laws will change and everyone, including SMSFs, will be required to report on a quarterly basis.

This will also capture all reportable events that may have occurred in the 2022/23 financial year. In effect, all reportable events that occur from 1 July 2022 – 30 September 2023 will have a reporting date of 28 October 2023.

There will be no grandfathering of the after the end of the month in which the event occurs.

• Commutations required due to the receipt of a commutation authority from the ATO must be reporting within 60 days of the authority being issued.

Impact for annual client

Many trustees and their advisors would be reporting on an annual basis, especially those who are processing their financial accounts annually. For those trustees of SMSF, who current report annually, will need to put in place processes to remind them to report quarterly should an event occur that would impact their TBA.

Often it is the SMSF accountant or administrator who is lodging the Transfer Balance Account Reports (TBAR), and they also will need to be aware of these new reporting rules and keep an eye out for any events that might require the lodgement of a TBAR.

entries’ in order to lodge a TBAR will result in double handling and increase the chances of errors occurring. We would not encourage this process as this might lead to the further scrutiny by the ATO regarding the specific event being reported.

Late lodgement penalties

Transfer balance account reporting is akin to the requirement to lodge tax returns and activity statements in that, late lodgement may lead to penalties for failure to lodge on time. A penalty unit, currently $275, can apply for each 28 days (or part thereof) that a report is lodged late. Up to a maximum of 5 penalty units.

Given the pending increase in the general transfer balance cap from 1 July 2023 and the implications for personal transfer balance caps, the sooner events are reported, the sooner these values can be correctly determined.

More pressure on accountants

Repayments of LRBAs commenced from 1 July 2017 where there is value shifting between accumulation and pension phase old rules either. Funds that were previously identified as annual reporters will be quarterly reporters from 1 July 2023 and will need to consider the above-mentioned reporting date for events that have, or will occur, this financial year.

Existing quarterly reporters do not receive an extension to lodge and will still need to report events from the 2022/23 financial year on a quarterly basis.

Going forward, reporting dates will be:

Thankfully, estimated values of the event can be lodged, with more accurate information reported via an amendment at a later date. However, this does create inefficiencies as the reporting mechanism is often linked to the software the transactions are processed in. Having to create ‘dummy

While the ATO have chosen not to apply penalties for late lodgement to date, it cannot be expected that this will continue. With the streamlining of reporting and having all SMSFs on the same reporting regime, it will be easier for the ATO to start imposing penalties. It is important to note that there is only a requirement to lodge if there are events that need to be reported. Unlike an activity statement, for example, where you may still be required to lodge a nil statement when there is nothing to report, transfer balance account reporting is driven by an actual reportable event.

These new requirements are likely to place additional pressures on accountants and administrators of SMSF. It is important for accountants and administrators of SMSF to review their reporting practices to try and avoid late lodgements of TBARs. This is especially important for those clients that have previously been able to lodge their TBARs at the same time as lodging their SMSF Annual Return.

Warren Strybosch

You can call them on 1300 88 38 30 or email info@findaccountant.com.au www.findaccountant.com.au

There will continue to be some instances where reporting must occur earlier:

• Commutations resulting from a member voluntarily responding to an excess determination are to be reported within 10 business days