Technical expert pinpoints TBAR trap with transitional rules
SMSF trustees who exceeded the $1.6 million transfer balance cap by less than $100,000 will need to report the commutation of that excess amount sooner rather than later to avoid an excess transfer balance determination, says a technical expert.
Speaking in a webinar, SuperConcepts general manager of technical services and education Peter Burgess explained that deferred reporting in some circumstances can result in a lack of visibility with the member’s position in relation to their total balance cap.
Mr Burgess explained that where an SMSF member exceeded the $1.6 million transfer balance cap by less than $100,000 at 30 June 2017, they were eligible for the $100,000 transitional rules and had six months to remove that excess before incurring any penalties.
It is very important that these members report this commutation of this excess amount in a timely manner, he said.
“If funds don’t report this commutation for a while, then the ATO won’t know that the commutation has actually taken place and that might result in an excess determination being issued to your clients,” he said.
“So if your clients are making use of the transitional rules then make sure that you report that commutation sooner rather than later.”
Issues can also arise with reversionary pensions where events aren’t reported in a timely basis, he said.
“As we know, when a member dies and their pension reverts to their spouse, it will count against their spouse's transfer balance cap 12 months after the date of death,” he explained.
“Now it will be difficult to determine the available cap space if commutations have not been reported. Again that's a situation where we should be reporting commutations sooner rather than later.”
Mr Burgess said where SMSF practitioners are doing commutations for clients, particularly partial commutations, it is important to report that information as soon as possible, rather than waiting for the due date.
“The sooner we can get this information reported, the more visibility that members are going to have over their transfer balance,” said Mr Burgess.