Along with the new transfer balance cap that was introduced from July 1 this year, the ATO indicated in the recent past that more “events-based” reporting will be required for it to adequately deal with the evolving SMSF regime.
It has now announced, after it conducted detailed consultation with the SMSF sector, that its implementation of event-based reporting from 1 July 2018 will be limited to those SMSFs with members that have total superannuation account balances of $1 million or more.
ATO Deputy Commissioner James O’Halloran said that this means that funds with members that have total balances of less than $1 million can choose to report events that impact transfer balances at the same time that the SMSF lodges its annual return.
“As a result of this approach it is estimated that up to 85% of the SMSF population will not be required to undertake any additional reporting outside of current annual reporting timeframes for the foreseeable future.” O’Halloran said.
The ATO says that from 1 July 2018, those SMSFs that do have members with total superannuation account balances of $1 million or more will be required to report events impacting members’ transfer balances within 28 days after the end of the quarter in which the event occurs.
“However, it is important to restate that in all cases, regardless of the reporting timeframe that applies, reporting is only required if an event that impacts a member’s transfer balance cap actually occurs – for example, when a SMSF member first starts to receive a pension from their fund,” O’Halloran says.
The ATO issued a public position paper on 22 August 2017 about SMSF event-based reporting. “The feedback we received highlighted concerns about the effort and costs that may be associated with the proposed approach,” O’Halloran says. “The ATO has listened carefully to this feedback, and in considering these concerns we have decided to provide an annual reporting timeframe for SMSFs with members with lower superannuation balances and to allow a quarterly reporting timeframe for other SMSFs.”
He adds that the combination of these approaches “sensibly balances administrative ease and efficiency with the increased need for transparency across the superannuation system”.
As part of its normal practice, the ATO will continue to evaluate pros and cons arising from this change to SMSF event-based reporting. “Should further change be considered to this arrangement or a change to the expectations on the broader SMSF sector, this would be the subject of community consultation,” O’Halloran says, adding that it remains important for all SMSF trustees and members to self-monitor and track events affecting their transfer balances on an ongoing basis, as envisaged by the transfer balance cap legislation.
“It is important that SMSF members are aware of their position in relation to the transfer balance cap to mitigate the risk of them inadvertently exceeding the cap and being exposed to an excess transfer balance cap liability.”