'Surprise' cap breaches tipped to ramp up

With the deadline now passed, Mr Itaoui said the ATO will be receiving a large amount of information in regards to member transfer balance caps and retirement phase values, which could see the number of excess transfer balance determinations ramp up over the next few weeks.

Based on conversations with accountants through its sister company, Knowledge Shop, Mr Itaoui said accounting firms have already begun receiving these excess transfer balance determinations for clients.

In a lot of cases this is occurring, he said, because the client hasn’t told their accountant about other balances sitting in super funds outside their SMSF.

“They’re ending up in a position where the client has an excess above the $1.6 million transfer balance cap and the ATO has just found out about it because the TBAR forms have just been lodged,” explained Mr Itaoui.

“There are going to be a lot of instances where the accountant doesn’t know that the client has exceeded this cap and they’ll only find out when the ATO issues this form and it’ll be a surprise.”

Mr Itaoui said there also continues to be a lot of confusion about how events need to be reported under the regime.

“Completing the TBAR form incorrectly can lead to the ATO issuing excess transfer balance determinations based on information that’s not correct. [That means] they have to go back to the ATO and adjust those amounts,” he said.

However, one of the biggest concerns, he said, is that some accountants and SMSF trustees don’t realise they also need to complete a TBAR form after the excess amount listed on the excess transfer balance determination has been commuted.

“So accountants may be receiving the excess transfer balance determination, telling their clients to commute the amount, but nobody is telling the ATO about the commutation. If the ATO is not told, then they won’t know that action has been taken and they will issue a commutation notice to the fund, which is not ideal,” he warned.

The ATO, he said, needs to be informed that the commutation has taken place via the TBAR form.

“So the TBAR form is meant to be used to communicate the commutation of a pension, based on the excess transfer balance determination,” he explained.

Mr Itaoui said it’s also unclear at this point whether superannuation software is ready to deal with excess transfer balance determinations just yet.

“Superannuation software can be used to lodge the TBAR, but it may not be ready to deal with these excess transfer balance determinations,” he said.

“[Practitioners] may have to use paper-based forms or log in online to the portal to actually lodge those amended TBARs.”