The volume of reporting by SMSFs under the ATO’s transfer balance account report (TBAR) regime could rise by 340 per cent, placing SMSFs and practitioners at risk of submerging under the ‘second wave’ of super reforms, according to the latest analysis from Class.
The “June SMSF Benchmark Report” found the increase in reportable events would be driven by a surge in pension commutations as the data revealed over 50 per cent of SMSF pensioners drew more than their required minimum per year.
Many of those are likely to perform additional commutations to maintain room under the $1.6 million cap for extra contributions, the report said.
Class analysis showed 39 per cent of pensioners drew down at least $5000 more than the minimum on their pensions in the 2016 financial year.
The average SMSF pensioner withdrew about $74,000 annually on their pension over a series of 12 transactions and overdrew $24,000 above their minimum.
If this pattern holds, there will likely be four withdrawals towards the end of the financial year beyond the minimum which would be commuted and reported to the ATO under the TBAR regime, the report said.
Pension establishments will also contribute significantly to the reporting requirements because many pensioners have more than one pension, 1.9 on average, and for SMSF pensioners, 21 per cent have three or more pensions.
“This time we looked at how many pension payments people were taking and the average was 12 payments, so taking a monthly pension withdrawal,” Class chief executive Kevin Bungard said during the firm’s webinar analysis of the report.
“What that means though is, depending on where we land [with the frequency of TBAR], if advisers are not on top of this [pension commutation strategies] with your clients, they could be disappointed when they come to you for help to minimise their transfer balance cap but you’ve missed the opportunity.
“It’s a lot of work but there are some real opportunities here because with this complexity, the role of accountants has never been more important.”
The TBAR regime for SMSFs is due to commence on 1 July 2018.