SMSF firms urged to review services ahead of TBAR change

ATO client engagement director Dalila Vellotti explained that an SMSF that is currently an annual reporter would therefore need to report a pension that was commenced on 1 July 2022 by 28 October 2023 at the very latest.

Prior to this clarification from the ATO, there were some suggestions that SMSFs may potentially have until the due date of their annual return to report events from the 2022–23 income year.

In an online article, Accurium head of education Mark Ellem said this recent announcement from the ATO means that SMSF professionals and their clients will need to prepare for a much earlier reporting deadline for reportable events that occur in the current 2022–23 income year.

Under the new streamlined TBA reporting regime, the $1 million test will be removed from 1 July 2023, Mr Ellem explained.

“Effectively, this means that the annual reporting concession will be removed for those SMSFs who qualified for annual TBA reporting,” he said.

“This presents an interesting transition period for SMSFs that are currently annual reporters. Of course, [for] those SMSFs that are already quarterly TBA reporters, there will be no change to the reporting frequency for TBA events.”

Mr Ellem gave an example of an SMSF with two members, Lionel and Jean, to explain the impact of the new reporting framework on SMSFs.

Lionel retires on 1 September 2022 and commenced a retirement phase account-based pension (ABP) on all his accumulation interest held in the SMSF. This is a reportable TBA event. 

Further, on 1 December 2022, Lionel partially commutes his ABP for $50,000. This is also a reportable TBA event. 

“As this is the first time the SMSF has ever commenced a retirement phase pension and it’s prior to 1 July 2023, the SMSF must determine if it’s an annual or quarterly TBA reporter, which will determine the due date for reporting the commencement of Lionel’s ABP,” explained Mr Ellem.

As neither Lionel nor Jean had a total superannuation balance (TSB) of at least $1 million, the SMSF is an annual TBA reporter.

Under the current TBAR framework, the due date for the SMSF to report the two events during the 2022–23 income year would be the due date of the SMSF’s annual return. However, this concession will be removed from 1 July 2023.

“When Lionel commenced his ABP after taking advice from his licensed financial adviser, the SMSF’s accountant and tax agent, Alistair, was informed and rather than utilising the concessional for SMSFs that are annual TBA reporters, they lodged the relevant TBA report on 15 October 2022. However, Alistair was not informed of the $50,000 partial commutation of Lionel’s ABP on 1 December 2022,” said Mr Ellem.

“Alistair becomes aware of the $50,000 partial commutation in January 2024, when Lionel and Jean provide him with the relevant SMSF documents for the 2022–23 income year. When Alistair confirms the partial commutation with Lionel, he also becomes aware of Jean commencing an ABP on her accumulation benefits on 1 July 2023.

“Alistair reports the $50,000 partial commutation of Lionel’s ABP and the commencement of a new retirement phase ABP for Jean as a TBA events on 29 January 2024, well after the due date for both TBA events of 28 October 2023.”

Mr Ellem said this example illustrates why SMSF professionals may need to review their approach to the administration and compliance requirements for clients who were previously annual TBA reporters.

“[They need to] ensure they can identify TBA events in a timely manner and report them no later than 28 days after the end of the relevant quarter,” he said.