SMSF Transfer Balance Account Reporting

 

1.  What is Transfer Balance Account Reporting? 

The Budget of 2016 announcements three new concepts in relation to SMSF member balances and reporting requirements.

• Transfer Balance Cap (TBC) – Which is the maximum each individual can transfer into retirement This is measured as a lifetime cap with unused portions indexed to inflation in $100,000 increments.
• Transfer Balance Account (TBA) – Like a bank account this is used to monitor how much has been transferred in or out of the retirement phase and this balance changes by way of credits when you start a new pension or debits when you stop and existing
• Transfer Balance Account Report (TBAR) – This is the report that gets sent to the ATO to let them know of events that impact the Transfer Balance Cap. These events are transactions that occur in your TBAR

2.  Will my Transition to Retirement Income Stream be impacted by these reforms?

Prior to these changes, a Transition to Retirement Income Stream (TRIS) was accessible to lots of individuals who met a partial condition of release and thus allowing them to begin a tax-free pension. Under the new rules if a member is under 65 and only meets a partial condition of release the income will now be taxable at 15% as it is in the accumulation phase and be known as a ‘TRIS - not in Retirement Phase’.

However, once a member notifies their fund the fund they have met a full condition of release or turns 65 years of age then the pension will automatically convert to a TRIS in Retirement Phase with the income then reduced to Nil (0%).

3.  So who prepares the TBAR?

This is usually the SMSF accountant or administrator will oversee the TBAR function but could also be completed by the fund’s trustee. Accountants and administrators that are the appointed tax agent can also report online via the tax agent portal, thus allowing them to lodge via bulk data entry the online form or bulk spreadsheet.  Where the TBAR function is overseen by a trustee then they may only be able to prepare and lodge a paper form only.

4.  Do I need to complete a TBAR?

Any member in that receives a superannuation income stream on or after 1 July 2017 must complete a TBAR for the commencement (or existence) of each superannuation income stream or for Specific ‘events’ that require a TBAR be completed.

5.  What is the purpose of a TBARs?

A TBAR provides a scope for the ATO to have effective monitoring of tax-free superannuation monies. Further with the changes to TRIS’s this helps to ensure the integrity of the superannuation system to reduce tax avoidance schemes as a result.

6.  So When is the TBAR due?

The due date for a TBAR will dependent on the Total Super Balance (TSB) of each member. If any member of the fund has a TSB over $1 million, then the TBAR is due on a quarterly basis.  Where all members of a fund have TSB below $1 million, then the TBAR is due annually. The due dates for quarterly lodgements are 28 days from the end of the quarter in which an event occurred. See table below for key dates:

Quarter	Coverage	Due Date
Quarter 1	July to September	Due 28 October
Quarter 2	October to December	Due 28 January
Quarter 3	January to March	Due 28 April
Quarter 4	April to June	Due 28 July

For SMSF reporting annually then the TBAR is to be lodged with the annual tax return and due on the same date, usually 15 May.

7.  Can the TBA have a negative value?

Yes, the TBA can have a negative value where, due to asset value growth the commutation value (value when the pension ceases) exceeds the pension commencement value. 

Here is an example: 

• If a pension starts on 1 July 2017 for $1 million this is a credit to the TBA and the balance is $1
• As a result of Growth, the balance increased to $1.2 million at 30 June 2018 (after pension payments have been drawn). In this case, the member decides to commute the full pension back to accumulation.
• The TBA now receives a debit of $1.2 million, giving it a negative balance of $200,000.
• A new pension could now be started for up to $1.8 million, incorporating the original cap of $1.6 million, plus the negative balance of $200,000.

8.  What events need to be reported in a TBAR?

Debit (decrease balance)	Credit (increase balance)
Stopping a pension Full or partial commutation	Starting a pension Including a TRIS moving into Retirement Phase
Failure to comply with pension standards or a commutation authority	Receiving a reversionary pension To be reported in the quarter or year the death occurs but the credit does not appear in recipient’s TBA until 12 months from the date of death
Payment splits upon divorce / marital breakdown	Excess Transfer Balance earnings that accrue
Structured settlement contributions	Some LRBA payments If the LRBA was started after 1 July 2017
Other events such as fraud, dishonesty or bankruptcy

 

9.  How often will you have an event to report? 

Some SMSF may report the initial pension commencement and never have a need to report again. This is likely to occur for individuals who only have superannuation amounts up to the cap of $1.6 million and take regular pension payments. So another TBAR is not likely to occur until the member passes where they still have a balance remaining or decide to switch superannuation funds. Where the full pension is depleted by pension payments then no further reporting is required.

10.  What if you have a Market Linked Pension?

A Market Linked Pension (MLP) does not receive a debit when they are commuted due to a technicality within the legislation. This is because MLPs are, historically, not able to be commuted. However, the ATO have advised that where an MLP debit is reported, they will not take further compliance action. Similarly, where an individual breaches their cap due to an MLP commencement, (or the initial value exceeds $1.6 million) they will not take further compliance action.

11.  What if I want to withdraw more than my minimum pension each year?

You may be able to withdraw the excess over your minimum pension as a Lump Sum Withdrawal to access some of your TBC. This works by processing a partial commutation from the pension equal to the Lump Sum Withdrawal amount. A partial commutation triggers a TBA debit freeing up some of the TBC for a new pension to be started. Alternatively, the excess amount may be taken from an accumulation account, if available. This allows a larger portion of the fund to remain in a tax-free phase moving forwards.

The advice provided is general in nature and is not personal financial product advice. The advice provided has been prepared without taking into account your objectives, financial situation or needs and because of this you should, before acting on it, consider the appropriateness of it having regard to your objectives, financial situation and needs.