Your guide to understanding the new Transfer Balance Reporting Requirements (TBAR)
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Find out what SMSF trustees can expect under the new SMSF event-based reporting regime. Is your SMSF ready for TBAR reporting requirements that are coming into effect on the 1 July 2018? Find out what these changes mean for you and how they will affect your SMSF. With the new super rules beginning on 1 July 2017, your requirement to report information about your SMSF and the pensions it pays you and other fund members may be changing. This is driven by the introduction of the new $1.6 million transfer balance cap which limits the amount of assets you can use to pay pensions from super with. Currently, pensions only need to be reported once a year through the SMSF annual tax and regulatory return to the Australian Taxation Office (ATO). From 1 July 2018, if a member of your SMSF has $1 million or more in superannuation and a member of the fund is receiving a pension from superannuation assets then your SMSF will be required to report more information about its members’ pension than currently needed. This is so the ATO can accurately monitor your transfer balance cap to know if you have exceeded the $1.6 million limit. Going over the $1.6 million transfer balance cap limit can result in needing to pay additional tax.
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Your guide to understanding the new Transfer Balance Reporting Requirements (TBAR)
- 2. Accountants AdvisorsAuditors Disclaimer Important Notice The information in this presentation is of a general nature only and may not be based on your particular objectives, financial situation or needs. Before making any decisions, you are strongly advised to discuss your particular situation with your Adviser or Accountant.
- 3. Accountants AdvisorsAuditors So what is in your transfer balance account (TBA)? Time issues with data availability to the ATO for SMSFs and APRA funds Transfer balance cap is a limit on the amount you can hold in retirement phase ($1.6 million in 2017–18)
- 4. Accountants AdvisorsAuditors When Does my Transfer Balance Cap Start? You will start to have a transfer balance account on: 1 July 2017, if you are already receiving a retirement phase income stream at the end of 30 June 2017, or On the day you first commence receiving a retirement phase income stream.
- 5. Accountants AdvisorsAuditors What is Included in my Transfer Balance Cap? TBA includes information from all your superannuation pension accounts All super providers with members in retirement phase will be required to complete and lodge this report to the ATO
- 6. Accountants AdvisorsAuditors What increases your Transfer Balance Account? Credits to your transfer balance account increase your transfer balance and reduce your available cap space. Start to receive a pension that is in the retirement phase Total value of any super interests Value of new retirement phase income streams Value of reversionary super income streams
- 7. Accountants AdvisorsAuditors What Decreases your Transfer Balance Cap? Reductions in your transfer balance account may reduce your excess transfer balance, and/or increase your available cap space. Commutations from your pension account Structured settlement contributions
- 8. Accountants AdvisorsAuditors List of Common Events reported via a TBAR Report The value of existing pension balances as at 30 June 2017 New pension commencements Full or partial pension commutations from your pension account
- 9. Accountants AdvisorsAuditors What are the reporting time frames? It depends on members total superannuation balance SMSFs will still be required to abide by legislated TBC reporting timeframes
- 10. Accountants AdvisorsAuditors Summary of Reporting Requirements
- 11. Accountants AdvisorsAuditors Example: Existing Pensions as at 30 June 2017
- 12. Accountants AdvisorsAuditors Example: Reporting commutations post 30 June 2018
- 13. Accountants AdvisorsAuditors Example: Taking more than the minimum pension
- 14. Accountants AdvisorsAuditors Example: Member passes away
- 15. Accountants AdvisorsAuditors Questions? Brad Raw Manager, Superannuation
Editor's Notes
- There has always been a problem with the data available to the ATO in terms of how much people have in different phases of superannuation throughout the year with the ATO often having to wait until a few months after the end of the year for APRA fund reporting and nearly 11 months for SMSF data to flow through. The transfer balance account is a new method designed by the ATO of tracking transactions and amounts in retirement phase. The balance of your transfer balance account determines whether you have space under your cap or if you have exceeded your transfer balance cap at the end of any given day. The transfer balance cap is a limit on the amount you can hold in retirement phase ($1.6 million in 2017–18).
- It is important to understand that this TBA includes information from all your superannuation pension accounts via SMSF, Retail, Employer, Industry funds, annuity providers and other funds. It is on a consolidated basis and not per account. All super providers, including self-managed super funds (SMSFs) and life insurance companies, with members in retirement phase will be required to complete and lodge this report to the ATO. The ATO will collate the data under your TFN and make available your consolidated Transfer Balance Account to you and your advisers.
- Credits to your transfer balance account increase your transfer balance and reduce your available cap space. The most common transfer balance credit arises when you begin receiving a super income stream (pension) that is in the retirement phase. The following amounts are credits to your account: the total value of any super interests that support retirement phase income streams you are receiving on 30 June 2017 the value of new retirement phase income streams, including super death benefit income streams and deferred super income streams, that you begin to receive on or after 1 July 2017 the value of reversionary super income streams at the time you become entitled to them (although the timing of the credit may differ in certain circumstances) the excess transfer balance earnings that accrue on any excess transfer balance amount you have.
- Reductions in your transfer balance account may: reduce your excess transfer balance, and/or increase your available cap space. Events that cause your account to be decreased: include commutations from your pension account, structured settlement contributions, and certain other events that cause a change in the value of your retirement phase interests.
- The value of existing pension balances as at 30 June 2017; New pension commencements (including death benefit pensions, reversionary pensions and when a TRIS member satisfies a condition of release and the pension converts to an ABP); and Full or partial pension commutations from your pension account.
- It depends on whether the SMSF had one or members in the fund at 30 June 2017 with a total superannuation balance equal to or greater than $1 million.* If at the prescribed time, the SMSF had no members with a total superannuation balance equal to or greater than $1 million, the above listed events are only required to be reported to the ATO at the same time the SMSF lodges its SMSF annual return. Otherwise the above listed events will be required to be reported to the ATO within 28 days after the end of the financial quarter in which the event occurred. Note: SMSFs will still be required to abide by legislated TBC reporting timeframes specified within a Commutation Authority issued by the Commissioner.
- Jane commenced her income stream in her SMSF back in October 2016. As at 30 June 2017, Jane’s total superannuation balance was $800,000. Jane makes a lump sum withdrawal (commutation) in November 2018. Jane’s SMSF is only required to report the lump sum pension withdrawal to the ATO at the same time Jane lodges her 2018/19 SMSF annual return. If Jane’s total superannuation balance as at 30 June 2017 was instead $1,100,000, Jane’s SMSF would be required to report the lump sum pension withdrawal to the ATO by 28 January 2019.