Where a member’s Total Super balance is in excess of $1 million, a SMSF will be required to report to the ATO quarterly from 28 October 2018.
TBAR requires commutations and establishments of super pensions to be reported in the month and quarter after they occur. This is a dramatic tightening of the current rules, where pension transactions are often reported nearly two years after the SMSF annual return is lodged.
The major reason for the higher volume of reporting is that over 50% of SMSF pensioners draw more than their required minimum per year. Many of those are likely to perform additional commutations to maintain room under the $1.6 million cap for extra contributions.
This commutation strategy may be quite popular and any amount of $5,000 or above overdrawn from a pension will likely be commuted.
Pension establishments will also contribute significantly to the reporting requirements because many pensioners have multiple pensions. Reportable events could also be increased by two-member SMSFs shifting funds between members to keep under the pension caps.
Commutation is the process of converting a super income stream into a super lump sum.
Transfer Balance Account
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).
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
- the day you first commence receiving a retirement phase income stream.
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.