Recent changes to superannuation rules have highlighted a need for more frequent reporting for SMSFs and will play a big part in making the popular end-of-financial-year (EOFY) annual processing model redundant, according to an SMSF expert.
SuperConcepts SMSF technical specialist Anthony Cullen said the introduction of the transfer balance account (TBA) and total super balance (TSB) was a key factor in slowly eliminating the usual “shoebox” method of clients handing their fund’s paperwork to an accountant annually for EOFY processing.
“In most cases, TSB is measured annually and is based on the member’s 30 June details from the prior year,” Cullen noted in a blog post on the SuperConcepts website.
“If we are only completing accounts on an annual basis – and bearing in mind SMSFs generally need to lodge their annual return by 15 May following the end of the financial year – when will their 30 June details be available?”
Pointing to the impact of TBAs on SMSF annual reporting, he said the ATO’s willingness to allow an estimate to be reported in the case of pension commencements was also likely to be problematic. The focus should be on trying to get the reporting right “the first time round,” he added.
“The idea of reporting an estimate and trying to correct it later requires double handling and increases the chances of errors being made,” he noted.
“While this may be an option for pension commencements, what options are available for commutations – whether they be rollbacks to accumulation phase or a payment out of the system?
“If you, as an adviser or accountant, aren’t aware of the withdrawal to purchase a new caravan until well after the fact, then you’ve probably failed to report it in time.”
He said frequent reporting would help accountants identify potential issues in a timelier manner, which would in turn give trustees an opportunity to take appropriate action if needed.
“With so many different matters relying on up-to-date information, it should only be a matter of time before annual accounting for SMSFs becomes the exception rather than the norm,” he added.
