Melanie Dunn, principal and senior actuary for Accurium, said in a recent webinar that it is important going forward that those working within the SMSF space educate their clients on the importance of disclosure when events such as pension commencements occur in light of the quarterly reporting regime which is now in place.
“Transfer balance account reporting now needs to be done within 28 days of the end of the quarter in which that event occurs,” she said.
“The ATO says if you are starting a pension, it expects you to have a good understanding of the balance which will be used to commence that pension. We do know that once a pension starts, no additional capital can be added, so we do need to work out what our minimum pensions are and our starting pension commencement position.”
Although documentation is sometimes done to commence the pension and then the balance is determined and documented after that fact, the TBAR needs to be completed with as good an estimate as can be achieved.
“If the final value of that pension commencement is materially different, the ATO said it would expect the original TBAR to be cancelled and re-submitted with the correct information,” Dunn said.
“Unfortunately, there’s no black-or-white guidance from the ATO here. If in doubt, redo it or talk to the ATO.”
Depending on the fund’s circumstances, there is the option for the commencement value to be the same as what is reported in the original TBAR and in this circumstance there is no need to cancel and re-lodge.
“Obviously, that will only work if the value of the TBAR is less than the actual fund balance that is available. But it’ll also depend on the pension documentation.”
“For example, if the member’s request says they want to start an account-based pension with their entire accumulation balance and the TBAR that is submitted doesn’t match the entire accumulation balance that has been calculated, then the TBAR would need to be cancelled and resubmitted.”
A pension cannot be commenced on a lower amount, leaving a small accumulation balance contradictory to the member’s request.
“There are some complications or some additional considerations of moving to quarterly reporting,” Dunn added.
“It just means you need to be more active in looking for relevant events that are happening in self-managed super funds, and making clients aware that there is this additional reporting requirement, so they keep you in the loop of what events are happening to meet these TBAR obligations.”
