Reporting change requires attention to detail

TBA reporting

The shift to quarterly reporting will require greater vigilance by SMSFs in recording events while removing the perception they can post-date decisions.

SMSFs preparing for the switch to quarterly transfer balance account (TBA) reporting will no longer be able to make decisions after the fact and may find themselves open to late lodgement penalties, according to a technical expert.

SuperConcepts senior SMSF technical specialist Anthony Cullen said the shift to quarterly TBA reporting on 1 July 2023 will impact those that are currently reporting on a quarterly basis as well as those switching from annual reporting.

Writing in a blog post, Cullen noted the change in reporting requirements may end the view that some SMSF trustees are “making decisions after the fact”.

“Although the ATO have made it clear that a pension cannot commence any earlier than the date it is requested and that lump sum payments must be requested prior to the payment being made, we still see some people looking to retrospectively apply commencements and/or commutations,” he said.

“Considering these transactions as part of processing the year-end accounts, rather than at the time they occur, may lead to the late lodgement of the transfer balance account reports (TBAR).”

He added that any strategy set up at the start of a financial year to generate regular withdrawals as pension payments until the minimum payment is met and then allocate additional payments as commutations will now also need further oversight.

“It is one thing to have the strategy in place, it is another to know when the payments switch from being pension withdrawals and treated as commutations and become reportable,” he said.

He said SMSFs switching from annual reporting will have to address how they will deal with their accountant and fund administrator where they assist with the lodging of the TBAR as the latter will need to be aware of any reportable events throughout the year.

“The need to report events does not necessarily require accounts to be up to date, although it is preferred. Estimated values of the event can be lodged, with more accurate information reported via an amendment at a later date,” he said.

“However, this does create inefficiencies as the reporting mechanism is often linked to the software the transactions are processed in. Having to create ‘dummy entries’ in order to lodge a TBAR will result in double handling and increase the chances of errors occurring.”

The requirement to lodge a TBAR, where a reportable event had occurred, was similar to that for a tax return or activity statement and a maximum of five penalty units, at $275 per unit, could be applied for failing to lodge on time, he said.

“While the ATO have chosen not to apply penalties for late lodgement to date, it cannot be expected that this will continue,” he said.

“With the streamlining of reporting and having all SMSFs on the same reporting regime, it will be easier for the ATO to start imposing penalties.”

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