From 1 July 2023, changes to the transfer balance account report (TBAR) lodgement rules will come into effect.
From this date, all SMSFs will be required to report transfer balance account events on a quarterly basis. The purpose of this change is to streamline the reporting process and bring all SMSFs under a single reporting framework. This means the end of the annual reporter option, with all TBAR events requiring to be lodged 28 days after the end of the quarter in which the event occurred.
What is considered a TBAR event?
An SMSF must report events that affect a member’s transfer balance account. Common reporting events include:
- Commencement of a pension
- Commutation/cessation of a pension
- Lump sum withdrawals from a pension account
What events does a SMSF not need to report?
A SMSF does not need to report the following events:
- Pension payments
- Investment earnings and losses
- When an income stream ceases because the capital has been depleted
- Death of a member
What does this mean for you?
The ATO will have increased transparency on the reporting of pension commencements. For example, if a member decides to start a pension on 1 July, the intention should be followed with preparation of draft accounts by 28 October so the TBAR can be lodged by its due date. Nevertheless, the ATO provides that SMSF trustees may use a reasonable estimate of value for TBAR reporting, but where the income stream value differs significantly, the trustees should later lodge a correction once the values are known.
Where a TBAR is not lodged by the due date, penalties may apply, or worse, errors in the member’s reported transfer balance account may cause an individual to inadvertently breach their transfer balance cap.
These changes will require SMSF members/trustees to be proactive in advising their accountants of potential TBAR events. For example, where a member exceeds their minimum pension requirements during the year; the member should alert their accountant of the intended withdrawals, so it may be determined whether a TBAR reporting event has occurred.
As always, we recommend that you contact one of the super team should you have any questions on your TBAR reporting obligations.
