SMSF practitioners must be conscious of the move to mandatory quarterly lodgement of transfer balance account reports (TBAR) when managing income stream strategies involving drawdowns combining a pension payment and a commutation, a technical expert for the sector has said.
In particular, Accurium head of education Mark Ellem was alerting SMSF accountants and administrators to members who need to draw down amounts from their retirement savings more frequently than once every quarter.
“Let’s say the client wants to take a weekly payment from their fund. It will result in 31 TBA (transfer balance accounts) to report,” Ellem told attendees of the recent Accurium 2023 Compliance Day.
He pointed out prior to the 2024 financial year, this type of strategy would not have been an issue if the SMSF of the client in question was lodging its TBAR on an annual basis as no matter how many payments were made and how often they were made, it had no impact under that regime.
As such, he noted drawdown strategies involving partial commutations, while being advantageous from the perspective of creating transfer balance cap space for the SMSF member, had now become more complicated for practitioners to execute.
According to Ellem, even situations where payments that include partial commutations are made on a quarterly basis will still require the systems of accountants and administrators to be robust even though the strategy operates within the new compulsory quarterly TBAR reporting standard.
“[Even with this type of strategy] you’ll want to be ensuring that you were getting that data periodically,” he suggested.
He also warned practitioners against assuming the ATO’s compliance activities with regard to TBAR will remain the same as that downplayed the level of urgency this type of client management now requires.
“I’m not aware of the ATO ever imposing a late lodgement penalty for transfer balance account reports. But that’s got to change. It might have [occurred] because the ATO could tell whether the SMSF was a quarterly reporter or an annual reporter because it was a self-assessment, but it doesn’t matter now because they’re all quarterly reporters,” he noted.
“So you don’t want to [risk having] that late lodgement penalty occur.”