The ATO explained at the SMSF Adviser Technical Strategy Day in Melbourne this week that it has proposed a model for all superannuation funds, including SMSFs, to report information necessary to manage proposals such as the transfer balance cap on an events basis – that is, in real time.
“So effectively, for example, for the transfer balance cap, [SMSFs] would report details of credits within a fortnight of the event reporting,” ATO assistant commissioner Kasey Macfarlane told SMSF Adviser.
“However, having said that, for the 2017-18 year, effectively it is a time of transition as we transition to that proposed model. So what will actually happen is that in 2017-18, and no later than when an SMSF lodges its annual return, they will need to report relevant information that impacts on their transfer balance cap,” Ms Macfarlane said.
While this is pencilled in for the 2017-18 financial year, the ATO acknowledges the difficulties tax agents will face in obtaining information, such as valuations, ahead of the SMSF annual return reporting timeline.
Ms Macfarlane stressed that the ATO is undertaking targeted consulting with industry and this model remains a proposal at the moment. She intends to work closely with the SMSF sector in the lead-up to implementation.
In the meantime, she said SMSF trustees should consider changing their practices and bringing forward the timing in which they seek, for example, valuations, so that they are in the “best position” to comply with the new requirements, and can take advantage of any transitional concessions that are available.
The ATO will soon release further guidance on the proposals currently before parliament in the form of a law companion guideline.
The ATO needs to work in the real world to understand that although a pension may be started in an SMSF, the paperwork is often not completed until much later as the information required is simply not available at the moment of commencement. We are still waiting on tax statements from some managed funds (in November!!) and some managed fund valuations only became available last month. Also, everyone wants their refunds as soon as possible. It’s physically impossible to do it all at once. A realistic time frame is needed for reporting. Once a year on the annual return as we currently do with contributions would be sufficient.
I can see red tape springing up everywhere and compliance and software costs going through the roof.