Transfer Balance Account Reporting (“TBAR”) – why real time reporting is key

Created on November 10, 2018 10:59 am

With the first quarter of the TBAR reporting having come and gone last month, here is a reminder of what these new reporting requirements entail and why real time reporting for your SMSF is invaluable.

What is TBAR?

From 1 July 2018, every individual’s transfer balance account needs to be considered before some contributions can be made and/or impact how much can be used to support pension income streams. In order to do this, Transfer Balance Account Reporting (“TBAR”) was introduced whereby SMSFs need to report to the ATO on either a quarterly or annual basis of any TBAR events.

TBAR events – what needs to be reported?

Events that affect a member’s transfer balance must be reported, the most common ones being:

  • commencement of new retirement phase pensions; and
  • commencement of death benefit pensions; and
  • commutations of existing pensions.

As such, the pension commencement or commutation value will now depend on the member’s TBAR value and not the market value of the pension.

How often is the reporting?

The frequency of reporting depends on whether:

  • any members of the fund with a total super balance > $1m or more: the events must be reported within 28 days of the quarter end in which the event occurs;
  • all members of the fund have a total super balance < $1m: the events are reported annually when the fund’s income tax return is due

What happens if the TBAR lodgement is late?

Timely lodgement of the TBAR will ensure a member’s transfer balance account is update-to-date and accurate for any decisions such as contributions and pension commencements to be made.

If lodgement is late, then the member’s transfer balance account maybe adversely affected and result in penalties applied. For example, excess contributions tax on non-concessional contributions (“NCC”) which exceed a member’s NCC cap.

Non-lodgement of TBAR is $210 for each period of 28 days for each TBAR reporting event that is not reported, up to a maximum of $1,050.

However, being the first year of reporting, the ATO is generally not going to enforce these penalties.

How can real time reporting assist?

Now more than ever, a change of circumstances to the fund members will need to be actively communicated to their accountant or administrator. By having up-to-date information, the correct decisions can be easily made. This can be achieved via real time reporting so that current member balances can be calculated and TBAR obligations met by the lodgement deadline and penalties averted.