SMSFs told to review previous reporting following new laws
The ATO will be reviewing its compliance approach regarding transfer balance account calculations for market-linked pensions after new laws were passed by Parliament last week.
With Treasury Laws Amendment (2019 Measures No. 3) Bill passing through the Senate last week and now awaiting royal assent, the ATO is reviewing its compliance approach in relation to transfer balance account calculations where a member has commuted a market-linked pension.
The bill passed last week addressed an issue where an individual who commutes a market-linked pension which is a capped defined benefit income stream is entitled to a debit valued at “nil” and are retrospective to 1 July 2017.
Under the new approach, where one of these pensions is commuted in full, the value of the debit will be calculated as the amount of the original transfer balance cap credit in respect of the income stream, less the sum of the following amounts:
- The amount of any transfer balance debits (other than a debit arising from a family law income split) in respect of the income stream.
- The total amount of superannuation income stream benefits the person was entitled to receive before the start of the financial year in which the commutation took place. And
- The greater of:
- The sum of the superannuation income stream benefits paid during the financial year in which the commutation takes place. Or
- The minimum amount required to be paid under regulations 1.07B and 1.07C of the Superannuation Industry (Supervision) Regulations 1994 or regulation 1.08 of the Retirement Savings Account Regulations 1997 during the financial year in which the commutation takes place.
“As a result of these changes, the ATO is reviewing its compliance approach where we had previously advised funds that we would not, at that time, take compliance action if a fund did not report the required transfer balance account events of the commutation and restart a market-linked pension, or reported a commutation amount other than nil to us,” the ATO said.
“Funds will need to review the information already reported to us and consider whether they need to amend any reporting in line with the legislation.”
The ATO said it intends to provide guidance to trustees, agents and other tax professionals in August this year outlining the time frame in which it expects any review of the fund’s reporting to be completed.
“We will not take any compliance action against funds who do not review their reporting before this time,” the ATO stated.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
