Following the announcement by the ATO of a new streamlined transfer balance account reporting regime that will apply to all SMSFs from 1 July 2023, they have now clarified how the transition to the new reporting regime. Whilst the new systems will streamline reporting for all SMSFs, for one group it will require them to prepare for a much earlier reporting deadline for reportable events that occur in this current 2022-23 income year. It may also see a change in approach to annual fund administration.
Currently, the frequency of reporting transfer balance events that occur in relation to a member of an SMSF depends upon whether the fund is an annual or quarterly reporter. An SMSF that is a quarterly reporter must report such events 28 days after the end of the quarter in which the transfer balance account (TBA) event occurred. For example, an SMSF member partially commuted their account-based pension on 18 June 2022, this is a reportable TBA event and as a quarterly reporter, the SMSF need to have reported it to the ATO by no later than 28 July 2022.
Where the SMSF was an annual reporter, it would have up until the due date of the SMSF annual return for that income year in which the TBA event(s) occurred to report to the ATO. An SMSF that has an appointed Tax Agent and is not behind in lodgments of prior years’ annual returns would generally have a lodgment deadline of 15 May 2023 for its 2022 SMSF annual return. Where the SMSF in our previous example was an annual TBA reporter and had a due date for lodgment of its 2022 SMSF annual return of 15 May 2023, it would also have until 15 May 2023 to report the partial commutation of the SMSF member’s account-based pension that occurred on 18 June 2022 to the ATO.
Whether an SMSF is an annual or quarterly TBA reporter is primarily dependent upon whether it had a member with a prior 30 June total superannuation balance (TSB) of at least $1m. This $1m TSB test is applied either on 30 June 2017, for SMSFs that had at least one member with a retirement phase pension at that time, or at the 30 June prior to the income year the SMSF first ever commenced a retirement phase pension for a member.
Under the new streamlined TBA reporting regime the TSB test will be removed from 1 July 2023. Effectively, this means that the annual reporting concession will be removed for those SMSF who qualified for annual TBA reporting. This presents an interesting transition period for SMSFs that are currently annual reporters. Of course, those SMSFs that are already quarterly TBA reporters, there will be no change to the reporting frequency for TBA events.
The ATO has clarified how an SMSF that is an annual TBA reporter will transition to the new streamlined quarterly reporting requirements on 1 July 2023. For any TBA events that occur in the 2022-23 income year, whilst they would not be required to be reported until the due date of the 2023 SMSF annual return, which could be not until 15 May 2024, with the removal of the $1m TSB test from 1 July 2023, any unreported TBA events from the 2022-23 income year will need to be reported by 28 October 2023. That is, the TBA reporting concession for annual TBA SMSF reporters is removed from 1 July 2023.
This means that the 2021-22 income year is effectively the last income year that the TBA reporting concession for annual TBA SMSF reporters will be available.
Let’s consider the following example…..
The As Time Goes By Super Fund is an SMSF with two members, Lionel and Jean. They are both working, and their respective benefits held in the fund are not in retirement phase (accumulation interests).
Lionel retires on 1 September 2022 and commenced a retirement phase account-based pension (ABP) on all his accumulation interest held in the SMSF. This is a reportable TBA event.
Further, on 1 December 2022, Lionel partially commutes his ABP for $50,000. This is also a reportable TBA event.
As this is the first time the SMSF has ever commenced a retirement phase pension and it’s prior to 1 July 2023, the SMSF must determine if it’s an annual or quarterly TBA reporter, which will determine the due date for reporting the commencement of Lionel’s ABP.
Determination of whether the SMSF is an annual or quarterly TBA reporter is dependent on Lionel and Jean’s respective total superannuation balance on 30 June 2022, which are:
- Lionel: $785,685
- Jean: $952,250
As neither has a TSB of at least $1m, the As Time Goes By Super Fund is an annual TBA reporter. The SMSF’s 2023 SMSF annual return is due 15 May 2024, consequently this is the due date for the SMSF to report the two TBA events that occur in the fund during the 2022-23 income year to the ATO.
When Lionel commenced his ABP after taking advice from his licensed financial advisor, the SMSF’s accountant and tax agent, Alistair, was informed and rather than utilising the concessional for SMSFs that are annual TBA reporters, they lodged the relevant TBA report on 15 October 2022. However, Alistair was not informed of the $50,000 partial commutation of Lionel’s ABP on 1 December 2022.
Alistair becomes aware of the $50,000 partial commutation in January 2024, when Lionel and Jean provide him with the relevant SMSF documents for the 2022-23 income year. When Alistair confirms the partial commutation with Lionel, he also becomes aware of Jean commencing an ABP on her accumulation benefits on 1 July 2023. Alistair reports the $50,000 partial commutation of Lionel’s ABP and the commencement of a new retirement phase ABP for Jean as a TBA events on 29 January 2024, well after the due date for both TBA events of 28 October2023.
Alistair decides to review his approach to the administration and compliance requirements for Lionel and Jean’s SMSF, as well as other SMSF clients who were previously annual TBA reporters to ensure that he will be able to identify TBA events in a timely manner and report them no later than 28 days after the end of the relevant quarter.