SMSF firm clarifies TBAR reporting for family law splits
Knowing how to report a transfer balance account event following a family law split can be unclear and there is the risk of completing the wrong form, explains a technical expert.
Heffron SMSF Services senior SMSF specialist Alex Denham said that, when a superannuation interest in retirement phase is subject to a family law split, there are two ways to report the transfer balance account event depending on the payment split.
In an online article, Ms Denham explained that the common scenario for SMSFs is where the couple separates and the superannuation balance is subject to a payment split by transferring an amount out of the member-spouse’s account and paying it to the non-member spouse.
“Where the amount is to be paid from the member-spouse’s pension account, the pension will need to first be fully or partially commuted,” she said.
“The commutation is reported as a debit to the member’s transfer balance account (TBA) under the general rules via a transfer balance account report (TBAR).”
If the non-member spouse uses the member’s lump sum to start a new superannuation income stream, the new income stream will result in a credit to the transfer balance account of the non-member spouse — also reported under the general rules via a TBAR, she explained.
Ms Denham gave and example of two trustees of an SMSF, Don and Judy.
“Don is in receipt of a pension from the fund and his transfer balance is $1,000,000. In March 2019, he is required to transfer $500,000 to Judy as a result of their relationship breaking down — he transfers it from his pension account to her new account in a retail super fund,” she said.
“Don’s transfer balance is debited by $500,000 and now stands at $500,000. Judy decides to commence an income stream with the full amount she receives, and receives a $500,000 credit in her transfer balance account.”
