The ATO is cautioning SMSF trustees to not use a member commutation event when responding to a commissioner’s commutation authority (CCA) as it could create errors and delay resolution.
“Reporting correctly will help your members manage their transfer balance cap as they will have up- to-date information visible on ATO online services,” the regulator stated in an update addressing responding to CCAs correctly with the title “Get it right”.
The regulator stipulated funds need to notify it within 60 days of a CCA being issued using the correct reporting event and by lodging the transfer balance account report (TBAR).
The ATO also reminded trustees if the SMSF does not respond within 60 days of the CCA notice, the member’s income stream stops being in retirement phase and they cannot claim an earnings tax exemption for that pension in that income year or any later ones.
To report the correct event in the TBAR, the regulator pointed out one of the following must be reported: CC1 – full commutation of the amount stated in the notice, including cents; CC2 – partial commutation, such as when the income stream balance is less than the amount in the notice; CC3 – the member is deceased; or CC4 – the account is a capped defined benefit income stream.
If the income stream has been exhausted or closed, a member account attribute service closed notification for that account also needs to be lodged.
“This ensures we don’t issue future CCAs for that income stream,” the ATO explained.
The regulator also reminded SMSF trustees and advisers it is unable to grant a time extension to respond to a CCA.
“If you failed to respond to the CCA by the due date, we may contact you to request information of the full debit value of the income stream on the date the CCA was required to be complied with. This debit value will arise in your member’s TBA (transfer balance account) and resolve their excess transfer balance,” it said.
