In November last year, the ATO released a consultation on moving to a single transfer balance cap events-based reporting framework for all SMSFs. There are currently two different time frames for reporting transfer balance cap events for SMSFs, depending on total super balances.
In their submissions on the consultation, the SMSF Association and the National Tax and Accountants’ Association (NTAA) both supported moving to a framework where SMSFs are required to report transfer balance cap (TBC) events within 28 days after the end of the quarter in which they occurred, but not before 1 July 2023.
The SMSF Association, in its submission, stressed the importance of having clear messaging, education and guidance for both SMSF practitioners and trustees well in advance of any changes coming into effect.
“Consideration will be needed for practitioners currently reporting on an annual basis. They will need time to ensure that reporting is up to date for all impacted clients and that systems and processes are in place to make the necessary system changes and client education,” the SMSF Association said.
“Transitional measures will need to be clearly articulated and actively communicated to practitioners. This will be essential in ensuring that tax agents have a clear understanding on how they will apply, what is required by them, allowing time to communicate and educate both staff and their trustee clients, and review and update their business processes accordingly.”
The submission also highlighted that factors external to SMSFs, such as the impact of COVID-19, will need to be considered.
“Many of the accountants, administrators and tax agents who provide administration and taxation services for SMSFs also provide accounting and taxation services to other taxpayers,” it noted.
“This sector has been extraordinarily busy since March 2020 with no sign of abatement, as they help their clients battle through the various economic disruptions caused by COVID-19.”
The submission stated that many practitioners are working extraordinary working hours, and many businesses are understaffed or resourced.
“Concerns are held around the level of burnout that is or will be experienced in this sector. These pressures have been compounded with the latest COVID-19 outbreak which has seen a significant increase in the number of staff becoming infected and clients unable to respond to queries and information in a timely manner,” it said.
The NTAA, in its submission, pointed out that February to June is often the busiest period of the 2021 tax season for many practitioners.
“The NTAA believes that it would be prudent for the ATO to defer the application of any changes to the existing TBC reporting requirements until 1 July 2023, in order to avoid an increased risk of non-compliance,” it stated.
“Furthermore, the NTAA would strongly encourage the ATO to take a concessional compliance approach for the first 12 months after any changes to the existing TBC reporting requirements are implemented, by assisting SMSF trustees to comply with any new reporting requirements rather than focusing on the imposition of late lodgement penalties. This would be consistent with the approach taken by the ATO when the TBC event-based reporting requirements were first introduced from 1 July 2018.”
The SMSF Association also said in its submission that it was still too soon to be contemplating a move to monthly or 10-day reporting.
“Whilst earlier reporting should be actively encouraged, this should be through active education and guidance from the ATO in its dual role of tax administrator and regulator of the sector. The benefits of or need for earlier reporting should be clearly articulated,” the submission stated.
“It would be practically difficult for practitioners to effectively administer these shorter time frames more broadly at this time.”
The submission also noted that the current laws covering the issuance of excess transfer balance determinations and excess transfer balance assessments are extremely complex and restrictive.
“We would welcome the opportunity to discuss with the ATO how these provisions could be simplified so that administration of this area could be improved for the ATO, SMSF members, trustees, administrators, and tax agents,” the SMSF Association said.
Is there any industry associations that actually think it is ridiculous for SMSFs to be reporting quarterly? Am I the only one who thinks this? There is zero benefit that I can see for SMSFs to be forced to report on an earlier basis across the board.