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Administration, ATO, Pensions

ATO guidance needed on transitional TBA confusion

transitional TBA confusion

Confusion over transitional TBA reporting requirements has resulted in the double-counting of pensions and SMSF members being unnecessarily penalised.

Some ATO staff may be unaware of transitional arrangements in relation to calculating transfer balance accounts (TBA), leading to confusion and double counting of accumulation and pension accounts, according to an SMSF expert.

SuperConcepts SMSF technical specialist Anthony Cullen said the 2017 superannuation changes, which introduced TBAs, transfer balance caps and the total super balance (TSB), were proving problematic because of a lack of understanding about how to report transitional arrangements that were in place before the changes came into effect.

“These newish measures are now revealing some challenges, which may be due to a lack of planning, a lack of understanding or unintended consequences,” Cullen said in a blog post on the SuperConcepts website.

He cited a situation where a member’s pension was double counted and the member received an excess non-concessional contribution (NCC) notice from the ATO, despite following the TBA reporting requirements.

“Calls from the client and their accountant to the ATO have resulted in the administrator being blamed for incorrectly reporting information in relation to the TBA and suggestions that this be corrected,” he said.

“The only problem is there is nothing wrong with the reporting and there is nothing to be corrected, as they have been prepared in accordance with TBA reporting requirements.

“It would appear that some ATO staff are also not aware of these transitional arrangements and are therefore not providing concerned members with suitable guidance to deal with these excess NCC notices that, in a fair and reasonable world, should not exist.”

In a statement released today, SuperConcepts said following discussions with the ATO, concerns about clients needing to cancel existing TBA reporting due to TSB double counting may be premature.

“We’ve seen a lot of concern from our own customers and some confused analysis in the market about this issue, but we do not believe that reports will need to be redone,” Cullen said.

“It’s true the legislation is very difficult to understand in its current wording and we’ve been in constant communication with the ATO who are doing everything possible to provide clarity around this topic.”

He added one client had resolved the issue over the phone, while another had been told by the ATO to amend their TBA report when they voiced their objection to their excess NCC notice, despite their report being in accordance with the TBA requirements.

“These two cases not only highlight an inconsistent approach to dealing with the matter, but a broader misunderstanding of the nature of the problem itself,” he said.

“Whilst this issue may be an unintended consequence stemming from the transitional interaction between a member’s TBA and TSB on 1 July 2017, a resolution is needed urgently because it has the potential to impact any clients who are looking to understand their NCC bring-forward limits prior to making contributions in the current financial year.”

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