Speaking to SMSF Adviser, Australian Executor Trustees senior technical services manager Julie Steed said while it’s one of the details in the super reforms yet to be finalised, the ATO and Treasury have made it clear they expect real-time reporting for the commencement of pensions.
Depending on the types of deterrents or consequences implemented by the ATO and Treasury for ensuring SMSF trustees comply with these real-time reporting requirements, Ms Steed said this could result in significant confusion and administrative penalties.
“What will be the deterrent for people and how will that actually be monitored? [For example,] if I don’t report a pension within seven or 30 days, depending on what the reporting time frame is, then will it simply be that I’m prohibited from having a pension at that point in time or will it be that I have a fine or an administration penalty?” said Ms Steed.
“Will [the ATO] say if you don’t report the pension within seven days then you can’t have a pension?”
If this is the case, Ms Steed said this will have to be communicated very widely to trustees.
“You may have clients in May 2018 who think they’ve started a pension, believed they had exempt current pension income for the year, met their minimum pension payments by making a pension payment in June 2018 but are then denied the exemption for the investment returns – they will be obviously disappointed,” she said.
Currently, Ms Steed said there are around 100,000 people who are “blissfully unaware they need to report on a prompt basis” because at the moment they don’t do anything other than get their accounts prepared in April/May and then lodge those annual returns at that point in time.
“Often pensions are commenced with effect from 1 July, sometime during May the next year. That won’t be possible anymore so for people to actually appreciate how that’s going to actually work in practice and actually do it, and then have the ATO monitor that, it is going to be quite interesting.”
Last month, a poll by SMSF Adviser revealed around 70 per cent of respondents did not support the real-time reporting changes citing reasons such as “administration inefficiencies”.