BT outlines TBAR implications with 6-member SMSFs
SMSF clients considering adding extra members to their fund once the six-member measure is passed will need to consider how this might impact their TBA reporting and administration, says a technical expert.
Earlier this month, the government reintroduced the measure to increase the number of members allowed in an SMSF from four to six back into Parliament.
Speaking in a BT webinar, BT head of financial literacy and advocacy Bryan Ashenden said for SMSF clients considering adding members to their fund, if the measure is passed, advisers will need to guide clients through a range of important considerations.
One of the aspects they need to consider, he said, is how adding more members might increase the frequency of their transfer balance account (TBA) reporting.
“You increase the frequency of TBAR reporting as soon as you have a member in the fund with more than $1 million and you also have someone moving across into pension phase,” Mr Ashenden said.
While ideally events should be reported as soon as events occur to ensure balances and member information stays up to date, from a strict legal requirement, it’s likely the reporting will be more frequent, he said.
“You will also have more members in the fund, so it’s more likely that someone will trigger a reporting event,” he added.
Another important area of consideration, he said, is how the investment strategy for the fund will operate once further members are added.
“This starts off with the whole consideration of how investments in the fund will be dealt with. The more members we have, the more complicated it could be,” he said.
All the members may decide to simply have a pooled approach in terms of the investments in the fund.
“[Alternatively], each might decide to keep their investments separate from everyone else,” he stated.
“Or do you take a riskier position, particularly from an administrative perspective, and decide that some members will be pooled and other kept separate? How difficult will that become? This is very important once you start to get into those investment strategy considerations.”
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 has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.