There has been much in the media recently about the increased reporting requirements for SMSF trustees as a result of the introduction of the pension transfer balance cap (PTBC). The increased reporting in relation to the PTBC system will, in fact, put a greater burden on professional advisers than trustees.
A recent article stated that the real-time reporting would applying from November 2017, with SMSFs having to report to the Australian Taxation Office within 10 days any movements into or out of a superannuation account. To try to clarify the reporting requirements, I contacted the ATO media unit.
At the outset, the ATO stated that events-based reporting under the PTBC system would be required only when a member has a pension transfer balance account debit or credit for a particular month.
Recognising the severe impost on SMSF trustees if events-based reporting for PTBC purposes were to be required from July 1, 2017, the ATO has stated that, “Subject to some specific exceptions, most SMSFs will not need to report anything additional for the purposes of the super changes until the due date for lodgement of their 2016-17 annual return.”
The fact is the specific requirements for events-based reporting under the PTBC system have not been legislated yet. There are, however, some specific events that require SMSFs to report to the ATO within a particular time period. One of these is a fund’s compliance with a commutation authority, which must be reported within 60 days.
This should not be an onerous reporting requirement in most cases, as long as SMSF members do not have multiple superannuation accounts outside of their SMSF, members should not receive a commutation authority from the ATO.
In the response received from the media unit, there was no mention of a requirement to notify the ATO of reportable events within 10 days of the end of the month of the event occurring.
Instead, it was confirmed that an administrative concession was being allowed for SMSFs to report the commencement value of an income stream within 28 days after the end of the quarter that the pension commenced. The only other event affecting a member’s PTBC that could require reporting within 10 days of the end of the month that it occurred would be partial or full commutations.
The reporting requirements for pensions commencing, and possible requirement to report commutations, will require advisers to be more proactive and educate their clients on the ramifications of not contacting them and getting advice.
This is especially the case if advisers have clients that, for tax planning purposes, will commence an account-based pension part way through a financial year when they turn 60, or who need to draw down more than the minimum pension required to be taken.
For clients who will commence an account-based pension during a financial year, advisers will need to ensure, once the quarterly reporting requirements commence for SMSFs, that the SMSF administrator is made aware of when the pension will commence, so they can lodge a transfer balance account report within 28 days of when the quarter in which the pension commenced is over.
For those clients who need pension payments of more than the minimum required, if they want to use the strategy of taking the extra amounts as partial commutations of their account-based pension, the minimum pension payments should be paid regularly. Then the extra amounts required to fund the member’s lifestyle should be planned for, taken as lump sums, and reported as partial commutations within the required timeframe.