5 biggest TBAR headaches for SMSFs

Find out the five ways the new TBAR obligations are adding to SMSF administration pain.

Five biggest TBAR headaches for SMSF practices

The arrival of the new transfer balance account report (TBAR) for self managed superannuation funds (SMSFs) is creating major headaches across Australia.

reporting stressIndeed, many are only starting to appreciate how onerous the new requirements are, and how much they might need to change their approach.

1. Increased SMSF reporting obligations

TBAR adds to the already heavy reporting burden of SMSFs. From 1 July 2018, SMSFs have to report events that affect a member’s transfer balance and the amounts involved in such events.

Using TBAR – the approved form for reporting events related to a member’s transfer balance – SMSF trustees must report to the Australian Taxation Office (ATO) when:

  • a new retirement phase starts
  • a retirement phase income stream starts
  • a retirement phase income stream is commuted
  • a retirement phase income stream is transferred to another person because the spouse has died
  • certain other special events affect the cap

2. More reportable events than expected

It’s expected that reportable events will be three times higher than originally anticipated when the new reporting regime was announced. Most of the extra events will come from new pensions establishments and trustees adopting pension commutation strategies to help them manage their transfer balance cap.

Many SMSF trustees – and their administrators and accountants – have been caught off guard by the sheer number of reportable events that may arise.

3. More frequent fund processing

With the slew of events that must be reported, in many cases, annual processing of funds is no longer sufficient to maintain the visibility needed to ensure SMSF compliance.

SMSF accountants will need to:

  • identify clients affected by the new reporting requirements.
  • process funds more frequently to determine member’s total super balances.
  • report to the ATO more frequently.
  • potentially restructure your internal workflows and processes.

Without specialised expertise to manage SMSFs in an effective and timely manner, keeping on top of TBAR compliance obligations will be extremely difficult.

It will be near impossible to track total super balances and caps for each SMSF member, making it difficult to identify clients with reportable events and to provide accurate reports.

Advice for trustees on issues such as whether to make a concessional contribution, or when to start or end a pension, to maximise outcomes under the new regime will become even more rigorous.

4. Additional penalties for late reporting

SMSFs, through their accountants, must report events by a certain date to avoid penalties and adverse impact on a member’s transfer balance account.

For SMSFs with a member whose total super balance is $1 million or more, events must be reported within 28 days of the end of the quarter in which the event occurs. Other funds can report events when they lodge their annual returns.

The ATO may impose a penalty of $210 for every 28-day period that a TBAR remains unlodged after the due date, with a maximum penalty of $1,050 plus any interest charges that may apply.

5. Risk of errors through manual reporting

Lodging a TBAR can be a time consuming exercise if done manually, every time there is a reportable event. You also need to ensure you correctly will be subject to TBAR.

A manual approach not only takes a lot of time, but it increases the likelihood of errors in identification of impacted funds and the accuracy of the data supplied to the ATO. 

Related reading: What does TBAR mean for you?

Reduce TBAR headaches

If you are concerned that your SMSF will be affected by the new pension reporting requirements, please feel free to give Intuitive Super a call on 1300 856 064 to arrange a time to meet so that we can discuss your particular requirements in more detail.

Article by Class Ltd, the leading provider of SMSF cloud administration software. First published on 25 July 2018 - blog.class.com.au/blog/the-five-biggest-tbar-headaches-for-smsf-practices

Last Updated:28-10-2019 14:19