Transfer balance account reporting and ATO community consultation

• when a member commences a retirement phase income stream, including a death benefit income stream - including type of income stream, value and start date;
• when a member commutes retirement phase income streams;
• payments under a limited recourse borrowing arrangement (LRBA) (including the value and date of each relevant payment) if the LRBA was entered into on or after 1 July 2017 and the payment results in an increase in the value of the member's interest that supports their retirement phase income stream;
• transactions undertaken in compliance with a commutation authority issued by the ATO; and
• receipt (including value) of personal injury (structured settlement) contributions.

There are certain events that an SMSF does not need to report on under the EBR framework - these include pension payments, investment earnings and losses and the death of a member.

When to report?

From 1 July 2018, all SMSFs must report events that affect their members' transfer balances. If no event occurs, there is nothing to report.

How often to report?

SMSFs that have any members with a total superannuation balance of $1 million or more on 30 June the year before the first member starts their first retirement phase income stream must report events affecting members' transfer balances within 28 days after the end of the quarter in which the event occurs.

When all members of an SMSF have a total superannuation balance of less than $1 million, the SMSF can report this information at the same time as when its SMSF annual return is due (that is, annually).

Notwithstanding the above:

• SMSFs can report events as they occur and are encouraged by the ATO to do so; and
• if a member exceeds their personal transfer balance cap, there are some events which must be reported earlier. These are outlined by the ATO in its online publication.

What changes are the ATO considering and what effect will the proposed changes have on SMSF trustees?

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Revenue Practice Group.

More Cleardocs information on related topics

Based on feedback received, the ATO is now considering streamlining the transfer balance cap EBR requirements for SMSFs. The changes are intended to (among other things) simplify the EBR system for SMSF trustees and may change the manner and frequency of reporting by SMSFs.

In its consultation paper the ATO posed these questions:

1. Where a transfer balance event has occurred, would you prefer that the event is to be reported no later than 28 days after the end of the quarter in which the event occurred starting 1 July 2022 or 1 July 2023?
2. Would you like to see more frequent EBR reporting for SMSFs to further reduce reporting delays and improve an individual's experiences to better manage their transfer balance cap? For example, 28 days after the event occurred or 10 days after the event occurred.
3. Do you have any concerns about streamlining EBR reporting for SMSFs that you would like to raise?

The Tax Institute responded to the ATO's consultation paper and in doing so made the following submissions for the ATO to consider (among others):

• The Tax Institute supports a simplified EBR system. SMSFs should be encouraged to report regularly, but trustees should not be placed under an excessive compliance burden.
• The new EBR system should commence from 1 July 2023 to allow tax professionals an opportunity to prepare for the changes.
• Quarterly reporting is reasonable. SMSFs should be supported and encouraged to report earlier and more frequently, but not required to do so. Support may include a safe harbour for reporting best estimates* and regular communications and training from the ATO to SMSF trustees regarding their reporting requirements.
• The ATO should consider allowing SMSFs with small balances the option of annual reporting to reduce compliance costs.
• *The Tax Institute noted that SMSF trustees are frequently required to estimate the value of income streams and assets based on the information available to them - and this information can often be incomplete or onerous to obtain if reports are yet to be prepared as at the date the valuation is required to be submitted. The Tax Institute considers that there should be a safe harbour that:
• provides SMSF trustees with protection in relation to valuations that they submit to the ATO provided they use a reasonable method and reasonable evidence to obtain the estimates; and
• allows SMSF trustees to correct estimates, if they discover under-reporting based on information later made available to them.

Where can you seek further information and assistance?

The EBR framework is complex and highly regulated. We recommend that you seek independent professional advice to ensure that your SMSF is complying with the requirements. It is also important to monitor any changes to the requirements to ensure that your SMSF remains compliant and is able to benefit from any streamlining efficiencies.

For further guidance on the current EBR framework or your obligations, you may:

• visit the ATO's website, including the online publication; and/or
• contact a member of Maddocks' Commercial team on 03 9258 3555.

More Cleardocs information on a range of topics

You can read earlier ClearLaw Articles on a range of topics, including the following topics which you may find useful:

• SMSFs to report Transfer Balance Account events from 1 July 2018;
• New laws affecting SMSFs post 1 July 2021; and
• What and when to report for your SMSF.

Document packages that may interest you

• Superannuation Trust (SMSF)
• SMSF Pension Commutation