From 1 July 2017, the government has introduced a Transfer Balance Cap on retirement income streams. The cap started at $1.6 million and will be indexed periodically in increments of $100,000, in line with CPI*
A member’s balance in retirement phase income streams, along with any credits and debits that move in and out of it, make up their Transfer Balance Account.
Transfer Balance Account Reporting (TBAR) allows the ATO to keep track of movements to the Transfer Balance Cap (TBC) and Total Superannuation Balance (TSB)**
What does / doesn’t need to be reported?
TBAR requires the following to be reported, as these affect a member’s TBC:
- The opening balance of all existing retirement phase income streams as at 1 July 2017
- New retirement phase income streams
- Reversionary pensions
- When a member with a TRIS turns 65 (this puts the TRIS into Retirement Phase)
- Commutations out of retirement phase (either full commutations or partial lump sums)
- Compliance with a commutation authority
- Some LRBA Payments (Extremely rare. Normal loan payments do not count)
The following are not reportable as they do not count towards the TBC:
- Investment gains and losses
- A TRIS that is not in retirement phase (the member is under 65 and not retired)
- Pension payments (not lump sums)
- Cessation of an income stream due to withdrawal
- There is no restriction on the amount in accumulation phase, so no movements in accumulation accounts are reportable
- Death of a member
- Events such as Fraud, Family Law & Bankruptcy (these are reported in a Transfer Balance Event Notification form, not TBAR)
When does TBAR need to commence?
If there were no retirement phase accounts within the SMSF as at 1 July 2017, no TBAR would need to be lodged until one of the following Trigger Events occurs:
- A new retirement phase income stream is started
- An existing TRIS moves into retirement phase (the member turns 65 or retires after the age of 60)
How often do the reports need to be lodged?
The required frequency for lodgements of TBAR is locked in as at the time of the trigger event (or as at 1 July 2017 for funds with existing retirement phase accounts) and depends on the balances of the members in an SMSF.
- If a fund has a member with a Total Super Balance of over $1 million, it must report events affecting all member balances quarterly.
- If a fund has no members with a Total Super Balance of over $1 million, it can lodge annually.
Note: A member’s Total Super Balance is the combined total of all money that person has within superannuation, across all super funds.
This rule applies to any member of the fund.
Mary and Jim are both members of M&J Super Fund.
Mary has a balance of $500,000 and has just commenced a retirement phase pension, which has triggered TBAR reporting.
Jim has an accumulation balance of $1,100,000 and none of his balance is in a pension.
Even though Mary’s balance is less than $1 million, the fact that Jim’s balance is over $1 million means the SMSF now needs to lodge TBAR quarterly
Due dates for lodgement
Quarterly TBAR is due for lodgement by 28 days from the end of each quarter.
Annual TBAR is due for lodgement on the same due date as the SMSF tax return.
Remember: The frequency of lodgements is locked in when the TBAR begins. This does not change when member balances go above or below $1 million after the initial trigger event and will always remain the same.
If you have any questions about TBAR reporting and how it impacts you or your clients, give us a call today on 1800 24 23 22.
* The amount of indexation members will be entitled to will be calculated proportionally based on the amount of their available transfer balance cap space. If, at any time, they meet or exceed their cap, the member will not be entitled to indexation.
** Please refer to our separate article on Total Superannuation Balances for further information on what this is and why the ATO is tracking it.
Written by Millinda Cobban, SMSFcentral Client Manager.