The ATO has released a Positions Paper on how Super funds (including SMSFs) will be required to report events impacting an individual member’s pension transfer balance accounts for the purposes of the $1.6m cap. The ATO is seeking comment about options for phasing in this reporting over a ‘transition phase’.

This $1.6m limit will introduce reporting, to the ATO, more often and for more events (‘events based reporting’). It will also differ in that all Super Funds, for the same member, will have to report.

The Position Paper notes:

  1. From 1 July 2017, there is a new limit on the total amount an individual can transfer into retirement income stream accounts, such as pensions and annuities. This is known as the TBC. It also includes retirement phase income streams an individual may become entitled to, such as death benefit income streams. [See Div 294 of the ITAA97 for the TBC provisions]
  2. All superannuation providers, including SMSFs, will be required to report certain retirement phase income stream events to the ATO on an events basis. This reporting is required in order for us to track an individual’s transfer balance account (TBA) across all funds, and administer the appropriate consequences if an individual exceeds their cap.
  3. We recognise that event-based reporting for TBC purposes represents a significant shift from current reporting arrangements for you and we are making a range of administrative concessions to support you make this change.
  4. As a transitional concession, you will have until 1 July 2018 to commence TBC reporting regardless of the approach taken after 1 July 2018 – that is, regardless of whether option 1 or option 2 set out at paragraph 2 of this paper applies.
  5. From 1 July 2018 you will not be required to report anything to us unless a member of your SMSF has an event that impacts their TBA4.

The Position Paper offers 2 alternative ‘phase in’ arrangements after the first year (2017/18) concession of reporting only at the end of the year.

  • Option 1: proposes (post 1 July 2018 reps) reporting 10 business days after the end of the month in which the relevant event happens (subject to 3 exemptions); and
  • Option 2: proposes (post 1 July 2018) reporting 28 days after the end of the quarter in which the relevant event happens (subject to 2 exemptions).

The exact wording of the two Options is set out below.

[ATO website: Position Paper; FJM; LTN 161, 24/8/17; TM Month]

Extract from Position Paper (Options 1 & 2)

Option 1:

In accordance with the approach set out in the main body of this position paper, from 1 July 2018 SMSFs will be required to report events occurring in relation to their members’ transfer balance account 10 business days after the end of the month in which the relevant event occurs, except for:

  • −  Income stream commencement: an administrative concession will allow SMSFs to report the commencement of a retirement phase income stream (pension) 28 days after the end of the relevant quarter.
  • −  Limited recourse borrowing arrangements (LRBAs): an administrative concession will allow SMSFs to report relevant repayment events 28 days after the end of the relevant quarter.
  • −  Commutation Authorities: SMSFs must abide by legislated TBC reporting timeframes as specified within Commutation Authorities.

Option 2*:

  1. From 1 July 2018 SMSFs will have 28 days after the end of the relevant quarter to report all TBC events except for:
  • The commutation of an income stream because we have issued a member of an SMSF with an Excess Transfer Balance (ETB) Determination, which will need to be reported 10 business days after the end of the month in which the commutation occurred; otherwise we may issue you with a Commutation Authority that will require you to remove the excess, even if the member has already done so.
  • Compliance or non-compliance with a Commutation Authority we have issued to an SMSF, : SMSFs must abide by legislated TBC reporting timeframes as specified within Commutation Authorities.
  1. Following an appropriate transition period, SMSFs will then be required to move to reporting all TBC events 10 business days after the end of the month in which a relevant event occurs, other than compliance or non-compliance with a Commutation Authority which will still need to occur within the specified time frame.
  2. We consider that an appropriate transition period for SMSFs to move from quarterly to monthly reporting of all TBC events may be two years until the end of 30 June 2020, but welcome your feedback on this point.

    * Note – Whilst the approach set out in the main body of this paper is based on option 1 above, the examples in Appendices B & C provide a practical illustration of the outcomes under both option 1 as well as the transition period under option 2 before SMSFs would move to reporting all events 10 business days after the end of the month under that option.

 

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