Pension reporting to face increased scrutiny under new TBAR framework
SMSF professionals and their clients will need to take extra care to ensure pension transactions are reported in a timely manner once quarterly-based reporting for TBAR starts in July.
Speaking in a recent webinar, SuperGuardian education manager Tim Miller said the reduction in the minimum pension amount over the past few years from the 2019–20 income year onwards has seen increased focus on the treatment of any amounts above that minimum where members still want to receive the same amount of money.
Mr Miller explained that over the past few years, some members may have chosen to treat that excess pension payment or additional pension payment as a lump sum withdrawal from an existing accumulation interest or a partial commutation in order to provide more transfer balance cap space.
In terms of making an election to have that amount treated as a lump sum, Mr Miller said the prudent approach is for the members to have a standing order in place when they look to commence that pension that states that any amounts above the minimum will be subject to a partial commutation or will be subject to a withdrawal from the accumulation interest.
“If they don’t have a standing order in place, then they certainly need to have the capacity or understanding that prior to taking additional amounts, they at least need to notify their administrator, accountant or adviser or the transaction,” he explained.
Mr Miller said this will become particularly important once the SMSF sector moves to streamlined reporting for transfer balance account reporting from 1 July.
“As we progress to an environment where everybody is reporting on a quarterly basis versus an annual basis, we need to ensure that everybody is far quicker with their reporting of these transactions,” he warned.
“At the moment, there haven’t been any penalties applied to my knowledge for the late lodgement of transfer balance account reports but that’s not to suggest that the ATO won’t in the future look at doing that. So we need to be mindful of that from a transactional point of view.”
Mr Miller said the 50 per cent reduction in pension minimum is due to revert back to the normal minimum annual payment for super income streams from July this year.
“I think I’ve said that every year for the past two financial year so time will tell whether we see [that reduction extended for another year or not],” he said.
RSM Australia partner Katie Timms told SMSF Adviser last month that she believes the ATO could look to take a tougher stance on transfer balance account reporting this year with the whole SMSF sector moving to a quarterly reporting framework.
Ms Timms said the ATO had taken a fairly lenient and educative approach with transfer balance account reporting since it first came in.
“We’ve never seen any kind of action in relation to the late lodgement of a TBAR, and I’m wondering at what point we might start to see them cracking down on that,” she warned.
The fact the SMSF sector as a whole is moving to a quarterly reporting framework suggests the ATO may have concerns about the backdating of pensions and trustees changing tax strategies to suit tax situations.
“It will be interesting to see how it all rolls out,” Ms Timms concluded.
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.