As the industry is now well aware, from 1 July 2018, SMSFs will be required to report those events which impact on a member’s transfer balance account on a real-time basis..
There has been significant contention about this regime, particularly given that reporting time frames for various events related to SMSFs are not necessarily consistent, or in line with APRA funds.
As reported earlier today and foreshadowed last week, the ATO has now released a position paper which explores options for reporting time frames that are more in line with what is workable in the SMSF sector.
One option includes starting with quarterly reporting before diving straight into monthly reporting requirements. There are exceptions, including compliance or non-compliance with a commutation authority that has been issued to an SMSF.
The other option is to report events occurring in relation to the transfer balance account 10 business days after the end of the month in which the relevant event occurs. There are also exceptions here, including with LRBAs, which will have an administrative concession allowing reporting of relevant repayment events 28 days after the end of the relevant quarter.
SMSF Adviser readers have expressed concerns about the penalties that could apply with this regime, which the ATO’s assistant commissioner Kasey Macfarlane spoke to.
Essentially, Ms Macfarlane told SMSF Adviser that her team won’t be actively pursuing opportunities to hit SMSF professionals with late lodgement penalties.
“There are late lodgement penalties that apply. I want to stress that the ATO’s focus leading up to and after the first of July 2018 is to support SMSFs and their advisers in being ready for this, and helping them do what they need to do to be able to report these events,” Ms Macfarlane said.
“In the 2018/19 year, we will be be taking a judicious approach to any late lodgement penalties.
“The greatest risk, from our perspective, of SMSFs not reporting on time is the risk to the individual member if they’ve inadvertently and unknowingly made an error, and face that unexpected or increasing tax liability.”
She also moved to quash speculation about potential penalties associated with this regime and exempt current pension income (ECPI.)
“There has been speculation that the ATO might seek to deny ECPI claims where an SMSF doesn’t report on time under this model,” she said. “I just want to state that the ATO doesn’t intend to do that.”
Well done to a government who wants to reduce red tape and the ex small business minister for her understanding of small business and their major asset in retirement. Time for a change