Transfer Balance Cap reporting 

What does it mean for you?

julyFrom 1 July 2017, superannuation fund members are subject to a $1.6 million transfer balance cap (TBC), which limits the tax exemption for assets funding super pensions.

The TBC encompasses a significant amount of monitoring for an individual. This monitoring is to be facilitated by the Australian Taxation Office's (ATO) event-based reporting framework.

Event-based reporting is a significant shift in SMSF administration processes. Therefore, it is essential SMSF trustees understand the event-based reporting framework and get it right. 

Why events-based reporting?
Event-based reporting is required for the ATO to track an individual's transfer balance account across all their funds including public offer and defined benefit funds and administer the appropriate consequences if an individual exceeds their cap.

A SMSF is only required to report if one of its members has an event that impacts their transfer balance account, such as the ones listed below.

  • From 1 July 2018, timeframes for reporting are determined by the total superannuation balances of the SMSF's members:
    Where all members of the SMSF have a total superannuation balance of less than $1 million, the SMSF can report this information at the same time as when its annual return is due.
  • SMSFs that have any members with a total superannuation balance of $1 million or more must report events affecting members' transfer balances within 28 days after the end of the quarter in which the event occurs.

What needs to be reported?
A SMSF must report events affecting a member's transfer balance account, including:

  • Income streams a member was receiving on 30 June 2017 that continued to be paid to them on or after 1 July 2017 and are in retirement phase
  • New retirement phase income streams
  • Some limited recourse borrowing arrangement payments
  • Compliance with a commutation authority issued by the Commissioner
  • Commutations of retirement phase income streams

All SMSFs that were paying a retirement phase income stream at 30 June 2017 need to complete and lodge a TBAR on or before 1 July 2018 to report the balance of each pension individually, for each member as at 30 June 2017.

A SMSF is required to report earlier if a member has exceeded their transfer balance cap, regardless if it usually reports annually.

Rollover to an APRA fund
If you are going to roll over a super benefit into an APRA-regulate fund and start an income stream you are encouraged to report the communication as soon as it occurs.

As APRA-regulated funds have a monthly reporting regime, waiting to report the rollover can result in a double counting of the member's income streams.

How can we help?
If you are concerned that your SMSF will be affected by the new pension reporting requirements, please give us a call on 02 6686 3000 to arrange a time to discuss your particular requirements in detail.

General Advice Warning: This communication has been prepared on a general advice basis only. The information has not been prepared to take into account your specific objectives, needs and financial situation. The information may not be appropriate to your individual needs and you should seek advice from your financial adviser before making any investment decisions.