BGL Corporate Solutions believes the ATO has significantly underestimated the complexity of the new events-based transfer balance account reporting (TBAR) regime requirements, the amount of data that will be reporting and the impact on compliance costs on SMSFs and the broader super industry.
In May 2016 when the superannuation reforms were first announced, Treasury stated 96 per cent of Australians would be unaffected by the changes.
At the time, BGL believed 10 per cent to 15 per cent of SMSFs would be caught up in these changes.
As 48 per cent of SMSFs are in retirement phase, this means approximately 290,000 SMSFs will need to monitor and comply with the transfer balance cap requirements, adding significantly to SMSF administration, audit and advice costs, according to BGL.
“These costs are already starting to bite,” the company said.
“The ATO believes most funds will only report when starting a pension and after that, there will be no further reportable events.”
However, BGL’s analysis of SMSFs from over 3000 clients for the 2016/17 financial year found this was not the case.
“Whilst not all SMSFs have completed their administration work for this period, our research found 25 per cent of funds had at least one TBAR reportable event and over 50 per cent had multiple TBAR reportable events,” the firm said.
“If you extrapolate this to the total number of SMSFs, at least 150,000 SMSFs would need to report to the ATO in 2017/18.
“And with many pension strategies involving regular pension resets, this number, in our view, would repeat or even increase in future years.”
Furthermore, it was not only those SMSFs that need to report that will incur TBAR reporting costs, according to BGL managing director Ron Lesh.
“SMSF administrators are going to need to review all the funds they administer on a regular basis to determine whether TBAR reporting is required – this will add huge, unnecessary costs to SMSF administration that will be borne by SMSF trustees through higher fees,” Lesh explained.
“This is further exacerbated by the ATO’s wish to have all SMSFs provide TBAR reporting – whether the member balance is $150,000 or $1 million.
“Really, this is just overkill – Big Brother really does seem to have gone mad.”
While BGL has already introduced many features in its Simple Fund 360 software solution to help SMSF administrators with the capital gains tax reset and TBAR reporting, it could not do everything.
“There is always going to be a significant amount of manual work for SMSF administrators where this level of detailed reporting to the ATO is required,” Lesh said.