Speaking on the SMSF Adviser Show this week, ATO client engagement director Dalila Vellotti outlined a couple of the common errors that the ATO is still seeing with transfer balance account reporting for SMSFs.
“One of the common errors we see is where we issue a commutation authority and the funds in the account have been exhausted. Often the fund will report that it’s a commutation in part and that’s all,” Ms Vellotti explained.
“What they also need to do there is report that the account is closed, otherwise the ATO won’t know that the account is closed.”
What will happen in that instance, she said, is that the ATO will reissue a commutation authority.
When you undertake commutation in part where the funds have been exhausted in that account, please close that account and that should resolve the issue.”
Another common issue that regularly comes up, she said, is funds using the wrong way to report commutations.
“When funds commute an amount, instead of using the event member commutation, they often use the event income stream stops being in retirement.”
“However, this event can only be used if the income stream is no longer meeting the minimum pension payments so that then creates flow on effects for exempt current pension income.”
Ms Vellotti said it’s therefore important that SMSFs use the correct event to report the member commutation to avoid flow on effects and reverse workflows.
She also reminded SMSF professionals and their clients that where trustees are rolling amounts from the SMSF to an APRA-regulated fund, it’s best to get the reporting done as soon as possible to avoid the transfer balance account going into excess.
“APRA funds report these rollovers with ten days and the ATO will apply this data to the transfer balance account. What immediately happens is the individual goes into excess because the corresponding transaction has not been reported to the ATO,” she stated.
Ms Velotti said the move to quarterly reporting should help address this issue with rollovers.
