With Transfer Balance Account Report (TBAR), also called Event Based Reporting, having commenced from 1 July 2018, it is important to highlight some of its impacts to SMSF trustees.

In our earlier article ‘Event based reporting for SMSFs: an update’, we explained the purpose and reporting events for TBAR. In this article, we explore some of the ways how ‘real time’ TBAR reporting changes the ways trustees administer their SMSFs and to provide  a snapshot of what real time means.

TBAR and ‘real time’ reporting

As a quick recap, for SMSFs, the quarterly reporting of TBAR generally applies to SMSF members (and not just SMSF members in retirement phase) with total superannuation account balances of $1 million or more. Members with less than $1 million reports annually.

The good

Real time data

Provided the TBAR has been reported correctly and without duplication (see below), quarterly reporting allows those SMSF fund members access to more timely data of their current total superannuation balances.

Regular communications

TBAR ‘real time’ reporting necessitates the education, sharing of information and regular communications between the SMSF trustees with their advisers when SMSF transactions take place and the funds are being transferred. The failure of tracking these SMSF events and fund movements and the reporting of these events would result in tax penalties (see below).

The bad

Duplicate superannuation accounts

In June 2018, The Australian Taxation Office (ATO)  identified seven instances where an individual’s superannuation amounts have been duplicated and reported twice on their first TBAR for the 30 June 2017 balances, resulting in an inflated total superannuation balance and excess transfer balance determinations being issued by the Australian Taxation Office in error. Funds with duplicate accounts are required to undertake additional reporting to ensure correction and alignment prior to 8 September 2018.

Reportable TBAR events and total superannuation balance

As TBAR reporting is based on each reportable event and its frequency of reporting is based on the total superannuation balances, events such as receiving a death benefit may change to quarterly reporting for SMSF members who were annual as they have now gone over the $1 million threshold.

And the ugly!

Backdating documents

It was never ideal however not an uncommon practice for trustees to back date and execute SMSF minutes and resolutions, such as starting a pension or partial commutation of pension for a lump sum to stay below the $1.6 million transfer balance cap. Such minutes and resolutions are often prepared at the time of the SMSF income tax return by their accountants and advisers, many months after the financial year end.

TBAR reporting from 1 July 2018 means such reactive and retrospective practices by trustees can no longer be administered, as the quarterly reporting of starting or commuting a pension on the TBAR form necessitates the decision and related minutes and resolutions to be executed prior to the payment of pensions or lump sums. In any case, the practise of backdating is not encouraged and not considered appropriate.

TBAR non-compliance penalties

If an SMSF does not lodge a TBAR by the required date, the member’s transfer balance account will be adversely affected and the member may be penalised by the ATO.

The current penalties for non-lodgement of TBAR is $210 for each period of 28 days for each TBAR reporting event that goes unreported, up to a maximum of $1,050.

Planning, monitoring and communicating

Given the change to ‘real time’ TBAR reporting, it is pertinent for SMSF trustees to be on top of their TBAR reporting obligations. It is also important for trustees to actively communicate with their advisers regularly, so both parties can work together and monitor their SMSF’s reporting events and fund movements, instead of falling into non-compliance and attract unnecessary tax penalties.

This article was co-authored by Bill Leung, HLB Mann Judd Melbourne