The ATO has begun issuing excess transfer balance (ETB) determinations to SMSF members based on information reported to them.
It acknowledged that there may be situations where information reported to the ATO was incorrect or incomplete and has outlined what steps to take.
“We’re seeing that some members have exceeded their transfer balance cap (TBC) because they didn’t act to reduce the value of their pensions in their SMSF before 1 July 2017,” the ATO said.
“We’re also seeing other members exceed their TBC because they didn’t take into account all their pensions across all their funds, including capped defined benefit income streams such as lifetime pensions.”
Members with lifetime, or similar capped defined-benefit pensions, it said, should be aware that these pensions aren’t included in the default commutation notice included with the member’s determination.
“This is because we don’t send commutation authorities to capped defined-benefit pensions,” it said.
The ATO said that if information reported to them by the SMSF is incorrect, the SMSF will need to lodge TBARs cancelling the incorrect information and provide the correct information to the ATO as soon as possible.
“The member may want to request an extension of time. We’ll issue a revoked or amended determination once we’ve received and processed the new information,” it said.
There may also be scenarios, the ATO said, where the information reported by the SMSF is complete.
“For example, the member was in excess at 1 July 2017 and has not reported any subsequent commutations that reduced or rectified the excess,” it said.
Another scenario could be that the member was in excess at 1 July 2017 and has started an additional retirement-phase income stream, which will increase the amount they’re in excess during the determination period, the ATO explained.
Information may also be incomplete where the member has rolled over their interest to an APRA fund, but they have not reported the initial pension or the debit when the pension was commuted before it was rolled over.
In these situations, the SMSF will need to lodge a TBAR providing the correct information for all events that occurred between the day the member went into excess and the day the ATO made the determination.
There may also be information reported to the ATO by another fund that is complete or incorrect.
“The member will need to talk to the other fund to understand why they’ve reported this information. If the fund agrees they’ve made a mistake, they’ll need to correct their reporting,” the ATO said.
The ETB determination may also be incorrect where a structured settlement contribution hasn’t been taken into consideration, the ATO said.
“If the structured settlement contribution was made to the SMSF before 1 July 2007, the member will need to advise us of this using a transfer balance event notification form,” it said.
Where the structured settlement contribution was made between 1 July 2007 and 30 June 2017, the SMSF should already have reported this on their member contribution statement, the ATO said.
“They’ll need to check they reported the contribution to us as a structured settlement contribution and may need to contact us to check their reporting,” the Tax Office said.
“If the structured settlement contribution was made to the SMSF on or after 1 July 2017, they need to report this to us via a TBAR form.”
