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Smaller pensions may get TBAR transition

A goldfish leaps from one fishtank to another.

The ATO will consider transitional rules for smaller pensions for events-based reporting.

The ATO has revealed it will consider allowing a two or three-year transition period for events-based reporting under transfer balance account reporting (TBAR) regime for pensions that are significantly below the $1.6 million transfer balance cap.

At the Chartered Accountants Australia and New Zealand National SMSF Conference in Sydney yesterday, ATO SMSF segment assistant commissioner Kasey Macfarlane said the ATO was aware of growing concerns around the administrative impacts of TBAR.

“There is no doubt – and we recognise and appreciate – that this is a significant shift from current annual reporting arrangements and the way that the sector operates in terms of the administration of SMSFs, and it does change the dynamic of adviser and client relationships so requires more regular communication particularly when events are occurring in the SMSF in relation to members’ transfer balances,” Macfarlane said.

“In particular, there are growing concerns around the potential additional costs versus the benefit, especially in situations where their account balances are significantly lower than the $1.6 million transfer balance cap.

“In light of these concerns that have been raised with us, we are giving further consideration to how we might best help the sector transition to events-based reporting, in particular where the SMSF balance is significantly below the $1.6 million transfer balance cap.”

She acknowledged that the potential risk of these SMSFs inadvertently exceeding the cap was arguably lower.

“So we are looking at whether or not we might provide an additional transition period for those who do have significantly below the $1.6 million transfer balance cap, for example, if your balance was below $1 million you would not need to commence events-based reporting immediately on 1 July 2018; there might be a two or three-year transition period,” she revealed.

“We do expect to make some further announcements about that once we consider it more in the next couple of weeks.

“But I did just want to highlight that we are giving further consideration to that in light of the concerns raised with us through the feedback on the position paper, as well as more broadly with our engagement with the SMSF sector.”

In August, the ATO released a position paper seeking industry feedback on two frequency options for TBAR: monthly reporting or quarterly reporting with a transition to monthly.

Macfarlane revealed the ATO received an unprecedented number of submissions: 170 in total.

“Not surprisingly, the feedback was that most preferred quarterly reporting in the first instance with the transition to monthly, while there were also comments about having TBAR be quarterly forever with no transition to monthly,” she said.

Earlier this week, the SMSF Association declared its stance to the TBAR position paper, favouring quarterly reporting.

The peak industry body also recommended that 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.

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