With the introduction of the transfer balance cap (TBC), the Australian Taxation Office (ATO) proposed new reporting requirements on all superannuation funds, including Self-Managed Superannuation Funds (SMSFs).
After consultation with the SMSF industry, the ATO announced on 9 November 2017, a relaxed implementation of the new reporting requirements.
Under the proposed reporting regime, events that count towards an individual’s transfer balance account (TBA) were to be reported within a relatively short timeframe, some within 10 business days after the end of the month in which the event occurs.
Recognising the magnitude of increased administration for SMSFs, the ATO has limited the reporting to SMSFs with members with total superannuation account balances of $1 million or more.
What events will need to be reported?
SMSFs will only need to report events that impact their TBA. Those events include:
- Commencement of new an income stream (pension)
- Cessation of an income stream
- Rollovers income stream amounts to another fund to start a new pension
- Limited recourse borrowing arrangement (LRBA) repayment events
- Structured settlement contributions received on or after 1 July 2017
When do these events need to be report?
From 1 July 2018, those SMSFs that have members with total superannuation account balances of $1 million or more will be required to report the above events within 28 days after the end of the quarter in which the event occurs.
What are the consequences for not reporting?
If an SMSF fails to report by the required date, a “failure to lodge” penalty may be imposed by the ATO. Depending on how long the event remains unreported, the penalty can be up to $1050 (5 penalty units) for each event.
Tax on Excess Transfer Balance earnings
Where an individual exceeds their TBC, there is tax imposed on excess transfer balance earnings and these earnings accrue until the excess has been removed. Therefore, by reporting late, the individual may end up paying tax on a larger earnings amount then they would have if the amount was removed sooner.
How is Economos getting ready?
We are ready!
We have invested in technology back by a team of experienced SMSF specialist accountants to ensure our clients comply with the new event based reporting regime.