Practice Management

Adopt best practice for TBAR

SMSFs reporting on an annual basis under the ATO’s transfer balance account report (TBAR) regime should still endeavour to lodge in a timely manner, a specialist industry lawyer has warned.

DBA Lawyers director Daniel Butler said reporting events that occurred in the 2018 financial year would need to be reported at the same time that the SMSF submits its first TBAR, however, if the fund reports annually, it would be when the fund lodges its 2017/18 annual return, which is May 2019.

“SMSFs can take their time and take the latitude of this concession, but what is best practice?” Butler said during the firm’s most recent SMSF online update.

“Best practice is really to report on a timely basis because SMSFs will be reporting annually or quarterly plus 28 days from 1 July next year.”

He said many advisers and members will also rely on ATO records for a member’s transfer balance account, however, records of balances may not be up-to-date.

“I’m sure you can all recall the excess contributions saga pre-2013 where people were getting hit with a 93 per cent tax, and while excess transfer balance tax may only be 15 per cent [for first-time offenders] or 30 per cent, people still don’t want to be hit with that,” he warned.

“So there are those risks and even though we have the ATO concessions, that is, SMSFs can start reporting from 1 July 2018, the best practice is to lodge on time. Why take the concession?

“Look at it this way: as an adviser preparing all the pension documents and setting it up and you’re giving advice, wouldn’t it then be a good idea to also square off the TBAR because if you leave it for 12 months down the track, you could forget about it? So I’d encourage you to adopt best practice.”

He said while the industry was getting on with the new super rules, there was still uncertainty about the law.

“We’re getting to the pointy end of the year where we are now really grappling with issues as the reforms dust has largely settled, however, we are still getting our heads around the reforms provisions,” he said.

“There have been a lot of reform measures that have been very contentious in a number of respects.

“It hasn’t been smooth sailing and there are still a lot of issues we’re dealing with, with both Treasury and the ATO to nut out, because it was a big rush to get the law in and they couldn’t think about everything at that time.”

Last month, ATO SMSF segment director Maria Iacopino indicated certain scenarios affecting an SMSF member’s transfer balance cap should be reported under TBAR sooner rather than later to avoid double counting of income streams.

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