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  • Event-based reporting for SMSFs

    The event-based reporting (EBR) framework for self-managed super funds (SMSFs) commenced on 1 July 2018. It enables us to administer the Transfer balance cap. You generally need to start reporting to us, under the EBR framework, when your first member commences a retirement phase income stream.

    The transfer balance account report (TBAR) is used to report certain events and is separate from the SMSF annual return (SAR). The TBAR enables us to record and track an individual's balance for both their transfer balance cap and total superannuation balance.

    There is no 'special circumstances' discretion for contraventions of the transfer balance cap and it is particularly important for all SMSF trustees and members to self-monitor and ensure that members do not exceed their transfer balance cap.

    Find out about:

    What and when to report

    On this page:

    What events you need to report

    An SMSF must report events that affect a member's transfer balance, including:

    • details of pre-existing income streams (including value and type) being received on 30 June 2017 that    
      • continued to be paid to them on or after 1 July 2017
      • were in retirement phase on or after 1 July 2017
       
    • details of new retirement phase and death benefit income streams including value and type (when a death benefit income stream is reversionary, the start date will be the date on which the member died)
    • details of limited recourse borrowing arrangement (LRBA) payments (including the value and date of each relevant payment) if the LRBA was entered into on or after 1  July 2017 (or a pre-existing LRBA was re-financed on or after 1 July 2017) and the payment results in an increase in the value of the member's interest that supports their retirement phase income stream
    • compliance with a commutation authority issued by the Commissioner
    • details (including value) of personal injury (structured settlement) contributions
    • details (including value) of commutations of retirement phase income streams that occur on or after 1 July 2017.

    Some exclusions from reporting

    Events that an SMSF does not need to report include:

    • any pension payments made on or after 1 July 2017
    • investment earnings and losses that occurred on or after 1 July 2017
    • when an income stream ceases because the interest has been exhausted
    • the death of a member
    • information that individuals report to us directly using a Transfer balance event notification form (NAT 74919). Typically, this is when the following events occur
      • family law payment split
      • debit event from fraud, dishonesty, or bankruptcy
      • structured settlement contributions made before 1 July 2007.
       
    • information other funds will report to us, such as a member's interest in an APRA fund.

    See also:

    How often and when you need to report

    If an SMSF member had a pre-existing income stream, it needed to have been reported to us on the TBAR on or before 1 July 2018.

    From 1 July 2018, all SMSFs must report events that affect their members' transfer balances. Timeframes for reporting are determined by the total superannuation balances of an SMSF's members.

    When all members of an SMSF have a total superannuation balance of less than $1 million, the SMSF can report this information at the same time as when its SAR is due.

    SMSFs that have any members with a total superannuation balance of $1 million or more must report events affecting members’ transfer balances within 28 days after the end of the quarter in which the event occurs.

    Transfer balance account events that occur during 2017–18 should be reported when an SMSF's first TBAR is due.

    If an SMSF is reporting annually, this will be the same time as the trustee is due to lodge the 2017–18 SAR.

    If an SMSF is reporting quarterly, this will be 28 October 2018.

    An SMSF is required to report earlier if a member has exceeded their transfer balance cap.

    Any SMSF can choose to report events as they occur and in some instances are encouraged to do so to avoid incorrect excess transfer balance determinations issuing.

    See also:

    To work out if the quarterly or annual reporting arrangements apply, an SMSF will need to know the total superannuation balance of all of its members at the later of:

    • 30 June 2017 if a member had a pre-existing income stream in retirement phase or when the first member starts their first retirement phase income stream during the 2017–18 year
    • 30 June the year before the first member starts their first retirement phase income stream.

    Even when an SMSF has only one member with an individual total superannuation balance of $1 million or more, it must report all events for all members within 28 days after the end of the relevant quarter, even if the balance of the first member to start a retirement phase income stream is below $1 million.

    See also:

    Once the reporting framework is set, SMSF trustees will not be expected to move between annual and quarterly reporting, regardless of fluctuations to any of the members' balances.

    We will continue to evaluate the benefits and risks arising from this reporting framework. For example, the $1 million reporting threshold may be re-evaluated in the future, given that the $1.6 million transfer balance cap is indexed.

    See also:

    Total superannuation balance

    A member's total superannuation balance is essentially the sum of all their accumulation and retirement phase superannuation interests across all their accounts and funds.

    In recognition that a member's total superannuation balance could be spread across multiple superannuation providers, SMSF trustees will need to self-assess their members' total superannuation balances when determining if the annual or quarterly reporting framework applies as there may be outstanding information yet to be reported to us.

    Trustees are expected to demonstrate that they have taken a fair and reasonable approach to assess their members' total superannuation balances when determining if the annual or quarterly reporting framework applies.

    See also:

    When you need to report sooner

    If a member exceeds their transfer balance cap, you must report the following events sooner:

    • a voluntary member commutation of an income steam in response to an excess transfer balance (ETB) determination must be reported within 10 business days after the end of the month in which the commutation occurs
    • responses to commutation authorities must be reported within 60 days of the date the commutation authority was issued.

    Earlier reporting is encouraged in some situations

    We strongly encourage you to report earlier in some situations.

    For example, if an SMSF member rolls their super benefit into an APRA-regulated fund and starts an income stream there – and it is not reported to us by the SMSF at the time it happens – a double-counting of the member’s income streams will occur. This is because there will be a mismatch in timing of the reporting done by the APRA-regulated fund and the SMSF. In this instance, an SMSF is encouraged to report the commutation as it occurs, or no later than at the time of the rollover.

    Likewise, if the transitional rules apply and an SMSF member was in excess at 1 July 2017 and rectifies it by 31 December 2017 but does not report the rectification to us when the pre-existing income stream is reported, we will not know the member has rectified the excess. In this instance, an SMSF is encouraged to report the commutation that rectifies the small excess under the transitional rules at the time the pre-existing income stream is reported.

    In these situations, there is risk we will incorrectly issue an ETB determination and a commutation authority. This could lead to increased administrative costs for the SMSF.

    See also:

    Working out your reporting due date

    When a member of the fund has a pre-existing income stream that continues to be paid as a retirement phase income stream to the member on or after 1 July 2017, the TBAR due date is on or before 1 July 2018.

    For SMSFs with transfer balance account (TBA) events occurring in 2017-18 and future years, the following table will help you work out your reporting due date.

    Table 1: Due dates for reporting TBA events

    Transfer balance account (TBA) event

    Amount of SMSF members' total superannuation balance (TSB)

    TBAR due date

    A voluntary member commutes an income stream in response to an excess transfer balance (ETB) determination

    Not applicable, as member has exceeded their TBC

    Within 10 business days after the end of the month in which the commutation occurs

    A response to a commutation authority

    Not applicable, as the reporting obligation is set by legislation

    Within 60 days of the date the commutation was issued

    Any other TBA event – see What events you need to report

    When the first member started a retirement phase income stream during a year, and all members of the SMSF have a TSB of less than $1 million as at 30 June immediately before they started their income stream

    No later than the due date for lodging the SMSF's annual return for the financial year in which the event occurs

    Any other TBA event – see What events you need to report

    When the first member started a retirement phase income stream during a year and the SMSF has any member with a TSB of $1 million or more as at 30 June immediately before they started their income stream

    28 days after the end of the quarter in which the event occurred. For 2017-18 TBA events, this will be 28 October 2018.

    Once the reporting framework is set, SMSF trustees will not be expected to move between annual and quarterly reporting due dates, regardless of fluctuations in any of its members' balances.

    Consequences of late reporting

    If an SMSF does not lodge a TBAR by the required date, the member’s transfer balance account will be adversely affected, the member may be penalised and there may be reverse workflow for the trustee.

    In particular, if the SMSF is late reporting a commutation made after we issued an excess transfer balance determination to the member, we may send a commutation authority to their fund, putting the member at risk of having the excess amount removed from retirement phase twice.

    In the future, an SMSF may be subject to compliance action and penalties, although we don't intend to deny exempt current pension income (ECPI) claims if an SMSF doesn’t report their transfer balance cap on time.

    Find out about:

    How to report

    On this page:

    Reporting methods and lodgment

    You can lodge a TBAR to report information to us by:

    • completing an online form if you are an SMSF trustee or administrator
    • BDE (bulk data exchange) submitting a data file through the file transfer facility in the business portal or tax agent portal (the file must meet our bulk data entry specifications and you will generally need support from a software provider to do this)
    • completing the recognised spreadsheet if you are a tax agent
    • mailing a paper report.

    Depending on which method you use, you may be able to report multiple events for multiple members using an electronic method or up to four events per member on each paper form.

    See also:

    Correcting a report

    If you need to correct information you have reported to us in your TBAR, you must cancel the original report and then lodge a separate report with the correct information.

    The instructions specific to the lodgment method used contain further information on how to amend an incorrect report.

    Find out about:

    Commutation authorities for SMSFs

    A commutation authority is a notice issued by the Commissioner of Taxation to a self-managed super fund (SMSF), when an SMSF member has exceeded their transfer balance cap and we have sent them an excess transfer balance determination. They have either:

    • not commuted the excess amount in the determination in full by the due date
    • made an election for us to send a commutation authority to their fund to have the excess amount commuted.

    A commutation authority is also sometimes referred to as a Commissioner's Commutation Authority (CCA).

    On this page:

    What you need to do if you receive a commutation authority – overview

    If you are issued with a commutation authority you must, by the due date on the commutation authority, that is, within 60 days:

    • pay a superannuation lump sum by way of commutation (the commutation authority will detail the amount that must be commuted from a specified income stream for that SMSF member) or
    • choose not to comply with the commutation authority because the member is deceased or because we’ve issued it in relation to an income stream that is a capped defined benefit income stream
    • send us a Transfer balance account report (TBAR) reporting the details of the commutation or why you have chosen not to comply with the commutation authority
    • notify your member in writing that you have complied or not complied with a commutation authority.

    Note: The Commissioner doesn’t have discretion to grant you an extension of time to respond to the commutation authority.

    Next steps:

    What you need to report on the transfer balance report (TBAR)

    The TBAR must report that the SMSF has:

    • complied with the commutation authority by commuting the full amount from the income stream stated in the notice
    • complied with the commutation authority by commuting the income stream as much as possible – even if this is less that the amount in the commutation authority, this is known as the maximum available release amount and in some instances it may be nil
    • chosen not to comply with the commutation authority because    
      • the member is deceased
      • we issued the commutation authority in relation to a capped defined benefit income stream.
       

    It is important to ensure that the pension payment standards are met when partially or fully commuting an income stream.

    What you need to tell your member

    You must notify your member in writing (within 60 days of the issue date of the commutation authority) when you comply with a commutation authority and include the following information:

    • the member's name and address
    • income stream account number in the commutation authority
    • the issue date and due date of the commutation authority
    • the amount you were required to commute.

    If you have commuted an amount in response to the commutation authority you must also include

    • the amount you commuted
    • the date of the commutation.

    If you have chosen not to comply with the commutation authority because it was in relation to a capped defined benefit income stream, you must also include a statement to this effect.

    You must also sign the notice you provide your member and declare that the information it contains is 'true and correct'.

    Consequences of not responding to the commutation authority by the due date

    If you do not commute the required amount by the due date (that is, within 60 days of the issue date of the commutation authority) or tell us why you have not done so (using a TBAR), the income stream will stop being in the retirement phase. This will affect the fund's entitlement to exempt current pension income. You may also be liable for penalties or subject to compliance action.

    There is also an administrative penalty if you do not notify your member of your response to the commutation authority within 60 days of the issue of the commutation authority.

    Responding to the commutation authority

    When you can commute an amount, you should make reasonable efforts to contact the member and discuss their options. For example, whether to retain the commuted amount in an accumulation account or take it as a lump sum. If you cannot contact the member, you should commute the amount in a way that you judge to be in the member's best interests.

    Unless the commutation authority relates to a death benefit income stream, the member can choose to keep the commuted amount in an accumulation phase account or cash the amount out of the superannuation system.

    If the commutation authority relates to a death benefit income stream the commuted amount must be cashed out of the superannuation system.

    You don’t have authority from us to commute the member’s income stream after the due date on the commutation authority.

    Commuting the full amount

    You must commute the full amount set out in the commutation authority, including cents, when it is possible to do so.

    Next steps:

    Commuting a partial amount

    If you can’t commute the full amount stated on the commutation authority because the amount is higher than the value of the interest supporting the income stream, you must commute the value of the interest and close the account. As part of calculating the value of the interest that can be commuted, you should take into account any pro-rata minimum pension payments that need to be met.

    You must also lodge a TBAR to tell us you have complied in part.

    If the income stream stated in the commutation authority has already ceased (for example, if the member has already exhausted the full value of the interest through pension payments) then you need to lodge a TBAR by the due date to tell us you have complied in part, the commutation amount is nil and the account is closed.

    Example 1

    A member is receiving an income stream valued at $70,000 on 1 July 2018.

    On 1 October 2018 we issue you with a commutation authority for $100,000. You are required to commute the amount by 30 November 2018 (within 60 days of issue date).

    The member is receiving monthly payments of $525 so they have already received $1,575 to date. You decide to commute on 15 October 2018 therefore you will need to pay the minimum pension amount before you make the commutation. The minimum annual amount is $6,300 (the member is 86 so their minimum pension payment is 9% of the balance on 1 July 2018).

    The pro-rata amount is calculated by multiplying the annual amount by the number of days in the period, then dividing by the number of days in the financial year.

    In this example:

    $6,300

    ×

    107 ÷ 365

    =

    $1,850

    You make another minimum pension payment amount of $275 to ensure that the minimum pension payment standards will be met up to the date of the commutation.

    The remaining $68,150 is commuted and retained in an accumulation account in the SMSF.

    You lodge a TBAR reporting that you have complied with the commutation authority in part and report a commutation value of $68,150 and that the account is closed. You will need to report this on the TBAR by 30 November 2019.

    End of example

    Next steps:

    What to do if the income stream identified in the commutation authority is a market-linked pension that isn't a capped defined benefit income stream

    A market-linked pension isn’t a capped defined benefit income stream if it commenced on or after 1 July 2017. The pension rules that apply in these circumstances generally mean this type of pension can only be commuted to start another market-linked pension.

    If we issue you with a commutation authority in relation to one of these income streams, the maximum commutable release amount will be nil.

    If you receive a commutation authority in relation to this type of market-linked pension, you need to lodge a TBAR by the due date to tell us you have complied in part, the commutation amount is nil and the account is open.

    This may have consequences for the member.

    Next steps:

    What to do if the commutation authority relates to a capped defined benefit income stream

    You can choose not to comply with a commutation authority if it relates to a capped defined benefit income stream.

    If you choose not to comply with a commutation authority because it relates to a capped defined benefit income stream you must still lodge a TBAR by the due date to tell us you’re choosing not to comply for this reason.

    However, as we won’t issue a commutation authority to an SMSF in relation to an income stream you have told us is a capped defined benefit income stream, you’ll also need to amend your initial reporting to us to advise that the income stream is a capped defined benefit income stream. Amending your reporting may mean we need to recalculate your member’s transfer balance.

    Example 2

    You reported a member has an account based pension with a value of $2.0 million

    You receive a commutation authority requiring you to commute an amount from this pension.

    You review your records and identify that this is a capped defined benefit income stream.

    You lodge three TBARS to:

    • cancel the original incorrect information
    • correctly report the original pension as a capped defined benefit income stream
    • report that you’re choosing not to comply with the commutation authority because it relates to a capped defined benefit income stream.
    End of example

    Next steps:

    What to do if the member is deceased

    You don’t need to comply with a commutation authority in relation to a member who is deceased. However you must still lodge a TBAR by the due date to tell us you’re choosing not to comply for this reason.

    Note: You don’t need to report the death of a member on the TBAR for any other reason.

    Next steps:

    What to do if the account number for the pension has changed

    In some instances the reference you use to identify an income stream may have changed since the income stream was reported to us. For example, the SMSF has changed software providers and the income stream reported to us as account 123 is now referred to as account 123A.

    In these instances we may send a commutation authority identifying the income stream that needs to be commuted, which uses the account number you initially reported to us.

    You’re still required to commute the identified income stream, even though the reference you use has changed.

    Next steps:

    TBAR instructions for each commutation authority scenario

    This table provides detailed instructions of how to complete the Transfer balance account report (TBAR), depending on how you are responding to the commutation authority. Regardless of which scenario applies to you, the TBAR must be completed on or before the due date of the commutation authority.

    Table 2: TBAR instructions for each scenario

    Scenario

    Reporting using a paper TBAR

    Reporting using any other channel

    Commuting the amount in full

    At Question 12, tick the box Commutation authority - commuted in full.

    At Question 17, report the date you complied with the commutation authority

    At Question 18, report the value of the commutation.

    You should also complete Question 19 to tell us if you transferred the lump sum to an accumulation account or cashed it out of the superannuation system.

    If you’re using the online form from the Business portal select the relevant event from Reporting event drop-down list. The events in this list are the same as the events in Question 12 on the paper form.

    If you’re completing the approved spreadsheet select the relevant event from the Transfer balance cap reporting event type drop-down list. The events in this list are the same as the events in Question 12 on the paper form.

    If you’re using a software solution developed by your administrator, you’ll need to follow their instructions to select the relevant event that corresponds to the events in Question 12 on the paper form.

    Commuting as much as possible, including when the amount is nil

    At Question 12, tick the box Commutation authority – commuted in part.

    At Question 17, report the date you complied with the commutation authority

    At Question 18, report the value of the commutation, including if that amount is nil.

    Unless the amount is nil, you should also complete Question 19 to tell us if you transferred the lump sum to an accumulation account or cashed it out of the superannuation system.

    You must also select Closed at Question 21 unless the pension is a market linked pension and the maximum available release amount is nil. If this is the case then you must select Open at Question 21.

    Not complying because the commutation authority relates to a capped defined benefit income stream

    At Question 12, tick the box Commutation authority - capped defined benefit income stream.

    Not complying because the member is deceased

    At Question 12, tick the box Commutation authority - deceased.

    In addition to the questions included in the table above, you must also complete all other relevant information in the TBAR, such as the member’s details, fund’s details, event details, member account details and declarations.

    See also:

    What to do if you disagree with the commutation authority

    You can’t object to a commutation authority and your member can’t direct you not to comply with it.

    If you think the amount on the commutation authority doesn’t take into account a commutation by the member then this may be because your member commuted their income stream after the due date on the ETB determination or there was a delay in reporting the commutation to us.

    If your member disagrees with the way we calculated their excess, then they can seek an extension of time to lodge an objection to the ETB determination. However, this doesn’t remove your obligation to comply with the commutation authority by the due date, once it’s issued. If an objection is lodged to the ETB determination and we allow the objection in full, then we will revoke or amend the commutation authority, if we are able to do this, by the due date. Otherwise, you’ll still need to action the commutation authority by the due date.

    Instances when we may be able to vary or revoke a commutation authority

    In limited circumstances we may be able to vary or revoke a commutation authority once we receive and process any outstanding information. For example, if you think the amount on the commutation authority doesn’t take into account a commutation by the member then this may be because your member commuted their income stream after the due date on the ETB determination or there was a delay in reporting the commutation to us.

    However, varying your commutation authority won’t give you more time to comply. For example, if we issued a commutation authority with a due date of 30 November and receive information that allows us to vary it on 1 November, you’ll still only have until 30 November to action the varied commutation authority.

    What happens after you have complied with the commutation authority

    The table below provides information on what we will do next after you have responded to the commutation authority, based on your situation.

    Table 3: ATO action on commutation response

    Your situation

    Our action

    You comply with the commutation authority in full

    After you lodge a TBAR, we will send your member an ETB tax notice of assessment.

    You tell us the member is deceased

    After you lodge a TBAR, we will send your member's estate an ETB tax notice of assessment.

    You comply with the commutation authority in part and the account is closed, or if you didn’t comply because the income stream is a capped defined benefit income stream

    After you lodge a TBAR we will consider whether your member has other retirement phase income streams that are not capped defined benefit income streams. If they do, then we will send commutation authorities to the providers of those income streams until the excess is resolved. If they don’t resolve the excess, we will send your member a Notice of non-commutable excess transfer balance. If we send your member this notice, they will receive a debit in their transfer balance account to resolve their excess transfer balance. Once your member is no longer in excess we will send them an ETB tax notice of assessment.

    You comply with the commutation authority in part and report the maximum available release amount is nil, but the account is still open (for example, because it’s a market linked pension)

    We won’t send the member a Notice of non-commutable excess transfer balance after we have determined that they have no other retirement phase income streams that are not capped defined benefit income streams. In these circumstances the member will potentially be perpetually in excess and we may send an ETB tax notice of assessment periodically.

    See also:

    Find out about:

    Event-based reporting case studies

    In the case studies below, the pre-existing income streams or income streams that commence are in retirement phase.

    Table 4: Reporting requirement under different scenarios

    Main points

    Scenario

    Reporting requirement

    Pre-existing income stream exists

    Total superannuation balance for all members is below $1 million

    Bill has a total superannuation balance of $900,000 as at 30 June 2017, a pre-existing income stream valued at $900,000 and no other super interests.

    Over time, the value of the income stream increases to $1 million and Bill commutes $100,000 from the income stream on 1 July 2019.

    Bill's SMSF reported the pre-existing income stream to us before 1 July 2018.

    As Bill had a total superannuation balance of less than $1 million on 30 June 2017, the SMSF is required to report any events that occur annually in line with their SAR for that year.

    The SMSF would be required to report on the TBAR the commutation that occurred on 1 July 2019 no later than the due date of the fund's SMSF annual return for 2019–20, generally 15 May 2021.

    SMSF first starts to pay a member an income stream after 1 July 2017

    Total superannuation balance of all members is below $1 million

    Tam and Cho are the only two members of their SMSF. They have no other super interests.

    On 30 June 2017, Tam's total superannuation balance is $800,000 and Cho's is $550,000.

    On 4 February 2018, Tam starts an income stream valued at $700,000.

    As no member of the fund had a total superannuation balance of $1 million or more as at 30 June 2017 (the year before the first fund member commenced an income stream), the SMSF is required to report any events that occur annually in line with their SAR for that year.

    The commencement of Tam’s income stream would need to be reported to us at the same time the SMSF annual return for 2017–18 is due, generally 15 May 2019.

    SMSF first starts to pay a member an income stream after 1 July 2018

    Total superannuation balance of a member is above $1 million

    On 30 June 2018, Mary has a total superannuation balance of $1.2 million.

    On 20 September 2018, Mary starts an income stream valued at $1.2 million and has no other super interests. Over time the value of the income stream decreases to $800,000.

    On 3 March 2019, Mary commutes $100,000 from the income stream.

    As Mary had a total superannuation balance of $1 million or more as at 30 June 2018, the SMSF is required to report any events 28 days after the end of the quarter in which the event occurs.

    The commencement of the income stream would need to be reported to us no later than 28 October 2018.

    The commutation would need to be reported no later than 28 April 2019.

    Pre-existing pension exists and SMSF has annual reporting obligation

    Assets supporting pension grows to exceed $1 million

    Gary has a total superannuation balance of $900,000 as at 30 June 2017.

    He has two pre-existing income streams valued at $500,000 and $400,000 respectively and no other super interests.

    Gary continues to make contributions and, as at 30 June 2018, his total superannuation balance is $1.1 million. On 1 July 2018, he commutes the two income streams and starts a new income stream valued at $1.1 million.

    The trustee reported the pre-existing income stream to us before 1 July 2018.

    As Gary has a total superannuation balance of less than $1 million as at 30 June 2017, the SMSF is required to report any events that occur annually in line with their SAR for that year.

    This will not change even though his total superannuation balance increases over time.

    The following reportable events would need to be individually reported to us no later than the due date of the fund's SMSF annual return for 2018–19, generally 15 May 2020:

    • each debit resulting from the commutation of the two pre-existing income streams
    • the new income stream.

     

    First income stream commenced on or after 1 July 2018

    SMSF must calculate all total superannuation balances to determine reporting obligation

    Fiona, of Seagull SMSF, has a total superannuation balance at 30 June 2018 of $500,000 and starts an income stream valued at $500,000 on 1 July 2018.

    Jimmy has a total superannuation balance at 30 June 2018 of $2 million, made up of $500,000 in Seagull SMSF and $1.5 million in an APRA super fund. All of Jimmy’s interests are in accumulation phase.

    Jimmy is a member of Seagull SMSF and has a total superannuation balance of $1 million or more as at 30 June 2018. The SMSF is required to report any events 28 days after the end of the quarter in which the event occurs.

    Seagull SMSF must report the commencement of Fiona’s income stream to us no later than 28 October 2018.

    Rollover from SMSF to APRA fund inadvertently causes excess transfer balance

    On 30 June 2017 Jeff, a member of Snowflake SMSF, has a pre-existing income stream valued at $900,000, which his SMSF reported to us on 30 June 2018.

    On 7 August 2018, Jeff rolls over his interest, now valued at $800,000 to an APRA fund to start a new income stream on the same day.

    As Jeff had a total superannuation balance of less than $1 million as at 30 June 2017, the SMSF has until the due date for lodging its SAR for the 2018–19 year to report the commutation to us. However, this means the APRA fund will report the credit arising from Jeff’s new income stream before the SMSF advises us of the debit.

    Unless the SMSF reports the commutation at the time of the rollover to APRA, we will consider that Jeff will exceed his transfer balance cap by $100,000 and we will issue an ETB determination.

    Transitional rules apply and member commutes excess

    Member may receive a determination if commutation is not reported

    Alex had a pre-existing income stream valued at $1.64 million at 30 June 2017. As he exceeded the transfer balance cap by $100,000 or less on 1 July 2017 due to a pre-existing income stream, the transitional rules apply. Alex commuted $40,000 on 30 October 2017 to avoid having to remove the excess capital, plus notional earnings and pay excess transfer balance tax.

    Alex’s fund reported the pre-existing income stream to us by 1 July 2018.

    As Alex had a total superannuation balance of $1 million or more as at 30 June 2017, the SMSF does not need to report the commutation until 28 October 2018.

    However, if Alex’s fund does not report the commutation that was made under the transitional rules at the same time as the pre-existing income stream, we will consider that he has exceeded the transfer balance cap and issue a determination.

    Pre-existing pension exists and SMSF has annual reporting obligation.

    SMSF starts to pay a member a death benefit income stream on 15 January 2018.

    On 30 June 2017 Kate, a member of Alignment SMSF, has a pre-existing income stream valued at $900,000.

    On 15 January 2018, Kate starts receiving a death benefit income stream valued at $800,000.

    Alignment SMSF has annual reporting obligations and chooses to report the death benefit income stream to us at the time the 2017–18 SMSF annual return was due (that is 15 May 2019).

    The trustee of Alignment SMSF will need to report the pre-existing income stream to us by 1 July 2018.

    As Alignment SMSF did not report the death income stream until 15 May 2019, Kate has been in excess for 16 months.

    Kate must remove the excess capital of $100,000 plus the notional earnings that accrued from the day she exceeded her cap to the date of the ETB determination.

    Kate will pay excess transfer balance tax on the notional earnings that accrued from the day she exceeded her cap to the day she is no longer in excess.

    If Alignment SMSF had reported the death income stream earlier, while Kate would still have been in excess, the amount of notional earnings and excess transfer balance tax would not have been as high, as the excess would have been removed earlier.

    See also:

    Last modified: 02 Oct 2018QC 54088