The SMSF Association has called on the ATO to adopt a practical approach regarding the introduction of the transfer balance account report (TBAR) and in doing so has thrown its support behind the proposed ‘option 2’ method of reporting.
The industry body declared the stance in its submission to the regulator’s position paper on the transfer balance cap (TBC) and SMSF event-based reporting.
Option 2 is the proposed process whereby SMSFs have 28 days after the end of the relevant quarter to report, with two exceptions, all TBC events.
According to the association, this method was shown to be the preferred reporting procedure among 90 per cent of its membership, reflected by a recent survey, and will give both trustees and advisers an appropriate time frame to adjust to the new regime.
The requirements under option 2 will be part of a transitional period ending on 1 July 2020 at which time SMSFs will have to report all TBC events within 10 days after the month in which the reportable transaction occurs.
“We believe that quarterly reporting will allow for a smoother transition to event-based reporting as trustees and their advisers will have more time to ensure that reporting obligations are met after a relevant TBC event has occurred,” SMSF Association chief executive John Maroney said today.
“Shifting pension reporting to an event-based approach from the current annual method is a significant change for the superannuation system, especially for SMSFs.
“It is important that the ATO applies due caution in the design and implementation of TBAR and allows an appropriate transitional period to ensure minimal disruption, with less than half of the respondents to our survey saying they are ready for the introduction of event-based reporting.”
In its submission, the association also recommended the reporting requirements only be applied to members who have a total super balance greater than $1 million and that flexibility be shown regarding the transition period relative to the preparedness of the sector to adopt the more stringent reporting rules.
“We believe that the ATO should consult with the SMSF industry in early 2020 to understand the readiness of the industry to shift to monthly reporting. This will give the ATO the knowledge and flexibility to determine whether an extension of the transition period is warranted,” Maroney said.
“If the industry was not in a state of readiness for monthly reporting due to unforeseen circumstances, such as problems engaging with trustees, increased costs and system design failure, we would expect the transition period to be extended.”
In reference to the survey of its members, the association revealed a general concern among advisers as to their ability to cope with the volume of changes to the retirement savings system and the higher costs for clients resulting from increased reporting requirements.
“This is hardly surprising. It’s a common theme throughout the SMSF industry that the industry is currently overwhelmed with the superannuation changes taking effect from 1 July 2017, the introduction of the licensing regime for accountants and the usual ongoing compliance requirements,” Maroney said.