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ATO to address TBC commutation notice errors

The ATO has published an alert informing SMSF trustees of errors that may have occurred in the issuing of commutation notices regarding transfer balance cap (TBC) compliance.

CRT Alert 004/2019 reveals commutation notices may have been issued in relation to excess TBC balances that have been calculated erroneously.

According to the regulator, the errors have occurred for pension account balances reported via the Member Account Attribute Service (MAAS) and Member Account Transaction Service (MATS).

“We have identified that when the transfer balance cap system draws on MAAS and MATS information it is showing accumulation accounts as well as retirement-phase accounts and adding these to the account hierarchy that the transfer balance cap system uses for the default commutation notice and commutation authorities,” the ATO said in the alert.

As a result, the regulator admits there is a small risk it may have issued commutation authorities in relation to accumulation accounts or commutation notices regarding member pension account balances that actually include assets in a member’s accumulation account.

Commutation authorities and default commutation notices issued from 14 December 2018 onward are the ones likely to contain the error and the ATO noted a fix was scheduled to happen on 15 January.

In situations where the ATO identifies this type of error has occurred, the SMSF trustees will be notified. Conversely, if trustees recognise a default commutation notice and commutation authorities have been issued in error, they have been advised to inform the regulator by sending an email to [email protected].

The ATO issued a further instruction for SMSF trustees approached by other members with concerns they have been affected by this error.

“If you are contacted by a member who is concerned that we have included an accumulation-phase account in the list of funds on the default commutation notice, you should advise the member this is an error and withdrawals from this account will not result in a debit in their transfer balance account,” it said in the alert.

“We do not intend to issue a commutation authority to you for this account.”

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