ATO assistant commissioner, SMSF segment, Steve Keating said while SMSF trustees and tax agents are growing more confident with the obligations around transfer balance account reporting (TBAR) and there are now high levels of electronic reporting, there are still some key concerns in this area.
“One of the most significant issues we’re concerned about is late reporting and that’s resulting in members being in excess of the cap for longer periods, thereby needing to commute more from their pension accounts or paying more tax,” Mr Keating said in an online discussion with Smarter SMSF.
“Members are at risk of having their pension commuted twice and this might happen if they have both APRA and SMSF pension accounts, where they commute from their SMSF due to receiving a determination from us, but they don’t report that commutation to us.”
Failing to report the commutation can result in the ATO sending a commutation authority directly to the APRA fund, Mr Keating warned.
“Some agents and trustees do not appear to appreciate the importance of really timely reporting, and that’s a concern for us,” he stated.
The ATO, he said, is also worried about the level of duplicate reporting which is being driven by user error or where reporting isn’t required.
“We have seen instances where a member’s transfer balance account details as of 30 June 2017 have been reported to us for a third time,” he said.
“Also levels of retrospective reporting, and the cancellation of information after the excess transfer balance determination or commutation authority has been issued, continues to be an issue for us.”
Mr Keating said while the ATO accepts that some reporting is a genuine correction of reporting errors, in other cases, the reporting is certainly more questionable such as reporting a commutation which occurred in a year in which the SMSF annual return (SAR) had already been lodged and the SAR does not report either a lump sum or an accumulation interest for the member.
“We’re concerned about and [also] the reporting of a commutation that occurred prior to an excess transfer balance determination issuing, where the amount commuted is for the exact amount in the determination which also includes the earnings that were calculated by the ATO,” he said.
“Members of SMSFs not engaging with us early in the process after we’ve issued an excess transfer balance determination is becoming a problem.
“They’re leaving the resolution of any reporting issues until a commutation authority has been sent to the SMSF or the member’s APRA fund is due and then they struggle to correct their reporting on time.”
The seminar was very informative. Thanks to Aaron for organising it and Steve Keating for a balanced view and information. It helps practitioners to hear directly from the regulator in this fashion – bad and good. We have had so much upheaval of late, but even the past 3 years, that updates like this are essential to improve the accuracy of work being completed and the outcomes for SMSF’s generally.
Is anyone surprised by this? This is far too complex a system. A better option would have been to to tax pensions as they were before the changes in 2007. Tax free portion is tax free. Taxable portion taxed at marginal rates less 15% rebate for tax paid by the super fund. That way high income earners are taxed more, low income earners taxed less or not at all. People are encouraged to withdraw less maintaining their retirement nest egg for longer.
Clients don’t understand it. Half the time, we have no idea how much they have drawn until well after year end when they bring their. We have documentation in place to show decision that withdrawals above minimum are lump sums but we can’t lodge the TBAR until we do the work. Sometimes the minimum has been met even before we know what the minimum is as the prior year work hasn’t been done. Of course the TBARs are going to be late. Also we have no way of checking what TBAR’s have been lodged for a particular fund unless we also are agent for the member. Clients have no idea how to find this info on myGov and get confused. Some don’t even use computers. So double ups & missed reports are bound to happen. Unless the ATO provides agents access at a fund level to TBAR lodgements, this will continue.
The whole system is a debacle.
Even simpler just to limit the pension income deduction to a tax free threshold per pensioner but, no, trust Treasury and the ATO to dream up the most complicated way to fo anything. It’s called making theAustralian economy more productive – of bullshit regulation.
Ha! Given that the ato cannot process the TBARs we lodge correctly I don’t know what they expect. They regularly miss events, ignore pages, or have ‘keying errors’ where they record the wrong amount,
We have to call them at least twice a month to correct TBARs which have been incorrectly processed. Or sometimes not processed at all.
Sometimes we aren’t aware of the error until an incorrect determination issues, because we don’t have access to the individuals account on online services, and its purely because the ato have not recorded the TBARs correctly.