The ATO has announced changes to the lodgment deadlines for transfer balance cap reporting which will affect SMSFs with members having smaller total super balances.
The concept of the transfer balance cap (TBC) was introduced on 1 July 2017 as a means of limiting the balance which a super fund member could place in a tax exempt account based pension. The ATO maintains a transfer balance account (TBA) for each super member who holds a retirement phase pension in order to track their balance against their TBC. Super funds are required to report pension commencements and commutations to the ATO. Breaches of the TBC can result in compulsory commutation of the excess and the payment of penalty interest.
The ATO has announced changes to the deadline for reporting movements in a member’s TBA by super funds. Under the current rules, funds in which all members have total super balances of less than $1m at the previous 30 June can delay lodging their TBA reports until the due date for lodgment of the fund’s annual return, while all other funds must lodge TBA reports by the 28th day of the month following the close of each quarter. From 1 July 2023, TBA reporting will be streamlined, with all funds required to report movements in members’ TBAs by the 28th day of the month following the close of each quarter.
The ATO has also announced that any TBA transactions relating to the 2022-23 financial year which have not been previously reported must be reported by 28 October 2023.
There are situations in which it is desirable for SMSFs to lodge TBA reports even earlier than the end of the relevant quarter. For example, where an SMSF member commutes a pension in their SMSF and rolls the resulting benefit into an APRA regulated fund then commences a pension in the new fund. The APRA fund is likely to report the commencement of the new pension on the night after the commencement, and if the commutation has not been reported by the SMSF, the result will be an excess balance in the member’s TBA.
In the past some SMSF members have back-dated the commencement of a pension to, say, the previous 1 July, taking advantage of the fact that the relevant TBA report to the ATO can be lodged more than a year after the purported commencement date. Under the new rules, a pension that commences on 1 July will have to be reported to the ATO by the following 28 October. We expect that SMSF auditors will be particularly alert to pension commencements that are not notified in a timely manner to the ATO.
The change also represents a further difficulty for funds that are not maintained on software that is specifically designed for the administration of super funds. While it is possible to lodge TBA reports manually over the ATO online services platform, the major super fund software providers allow TBA lodgments to be made from within their packages without rekeying information.
Please contact your Nexia advisor if you would like any further information on this topic.
