Analysis undertaken by Class in the June 2017 SMSF Benchmark report has estimated that reportable events could rise by 340 per cent, driven by a surge in pension commutations.
“The major reason for the dramatic increase in reportable events is that SMSF pensioners who draw more than their required minimum will likely perform additional commutations to maintain room under the $1.6 million cap for extra contributions,” the report stated.
The data analysed by Class indicates that at least 39 per cent of pensioners drew down at least $5,000 more than the minimum on their pensions during the 2016 financial year.
“The average SMSF pensioner withdraws about $74,000 annually on their pension over a series of 12 transactions and overdraws $24,000 above their minimum,” the report revealed.
“If this pattern holds, there will likely be four withdrawals towards the end of the financial year beyond the minimum which would be commuted and reported to the ATO under the TBAR regime.”
The analysis also indicated that pension establishments will also account for a significant part of the reporting requirements because many pensioners have more than one pension, with the average number currently at 1.9. It also showed that 21 per cent of pensioners have three or more pensions.
Speaking in a webinar, Class chief executive Kevin Bungard said over 40 per cent of members have more than one pension, and among those who only have one pension, often members will recycle those pensions as a way of sweeping up contributions.
“When you look at the commutation data, there’s a strong possibility that you’ve got a number of members who are commuting the pension, sweeping up some additional contributions that have come in during the year and then commencing a new pension,” he explained.
“So even when people have one pension it may not be the same pension, year in, year out.”
In the report, Verante director Liam Shorte said that these numbers may be “further boosted by account-based pension establishments driven by a movement of funds out of TRIS and additional commutations by two-member SMSFs seeking to keep below the $1.6 million transfer balance cap by evening up their pension balances”.
The data from Class shows that 29 per cent of the 50,900 two-member SMSFs where at least one member has a balance over $1.6 million.
“There was an initial view that [the new reporting] was not going to be that big of a deal. [The view was] that most people are just going to start one pension and then until someone drops off the perch that’ll be it. That would mean only two reportable events over a 35 year period. [However], that’s clearly not the full story,” said Mr Bungard.
This is what I love about the data Class has access to. With 100,000 SMSFs they see a more accurate and up to date picture on SMSFs than the ATO who is still using figures from the 2014/15 financial year (because that is the most up to date they have).
Events-based reporting will provide a massive wake-up call for the majority of accountants who are only looking at their SMSFs once a year – typically many months [i]AFTER[/i] the end of the financial year.
Come [b]April 2020[/b] (when these accountants are finally looking at the 2018/19 SMSF returns) they will realise they should have been reporting TBAR events 18 months prior. Bugger :cry:.
If the implementation of events-based reporting is anything like the accountants licensing regime, we will see a lot of noise but very little action from many people in this proud and noble profession.
Who do you think you are kidding Dick. I fully endorse the sentiments of other concerned administrators accountants and trustees alike who understand just how complex “O’dwyer and her Canberra buffoons in the ATO and Treasury” are making superannuation. And has any one of these “gold plated CSS Lifetime pension members” considered us ordinary superannuation members in all this as we face greater fees at their expense along with more red tape rules regulations bureaucratic data reporting and so the stupidity goes on. The super legislation is already patched with so many band aids amendments rules and stupid unnecessary petty compliance that it is no wonder members of the public are losing confidence in the system and superannuation alike. Just about every person I talk to and that is a lot after 43 yrs in the industry has absolutely no idea about superannuation because these buffoons live up in the clouds when they continually stuffing around with superannuation to try and justify their own existence.
O’dwyer and her Canberra buffoons in the ATO and Treasury who’s only real world super experience is to do with their own gold plated CSS Lifetime pensions have next to no idea of how complicated and overly convoluted they have made the whole super system.
It is going to be an absolute data disaster and you can bet their systems will not handle to processes properly. As for the extra admin time and costs to the whole system will be another blowout that clients and advisers all pay for.
These dam politicians lack of common sense and reality just force more and more and more regulation and red tape onto everyone.
Wake up Pollies and get equated with reality for a change. Had the government consulted properly with the industry pre ramming these changes into the system we could have achieved the same results with far less BullS##t.
I don’t think the reporting will be too much of a burden. I’m sure it will be business as usual in no time.
This person’s name and comment must not be real!!!