The cap on the amount of superannuation benefits that can be transferred into retirement pension phase (known as the Transfer Balance Cap) recently increased by indexation to $1.9m from 1 July 2023.

It’s also important to note that all Self-Managed Superannuation Funds (SMSF) with members in the retirement phase will be required to report certain events that affect their members’ Transfer Balance Accounts (TBA) on a quarterly basis from 1 July 2023.

The transfer balance account requirement was introduced to monitor pension account balances in line with the superannuation changes that commenced from 1 July 2017. It applies in a similar way to a bank account, with credits to the account for new pension commencements and debits when a pension is stopped or commuted (partially or in full). It applies to every superannuation member that is in retirement phase, across all super pension accounts. Reporting requirements differ between APRA regulated funds and SMSFs.

What are the new rules?

Until 30 June 2023 transfer balance reporting requirements were dependant on total super balances (TSB). If the total super balance of any member of the SMSF was $1m or more on 30 June the year before the first member starts their retirement phase income stream (pension), quarterly reporting was required to report events (debits/credits) 28 days after the end of the quarter in which the event occurs. An annual reporting obligation applied to those SMSFs where no member had a total super balance of $1m or more, and this was done at the same time as the annual tax return.

From 1 July 2023, all SMSFs will be required to report and lodge a TBAR form 28 days after the end of the quarter in which a reportable event has occurred.

Transition rules apply to events that occurred during the 2023 financial year. These existing events must be reported by 28 October 2023.

What events are required to be reported?

  • When a member starts a retirement phase income stream, including death benefit income streams
  • Details of limited recourse borrowing arrangement (LRBA) payments if the arrangement 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 supporting their retirement phase income stream
  • Compliance with a commutation authority that is issued by the ATO
  • Details of personal injury (structured settlement) contributions

What does this look like?

Bob is 70 and is the sole member of his SMSF. He has an existing retirement phase pension that he commenced in 2017 for $1m. Bob made a Downsizer Contribution of $300,000 on 1 July 2023 following the sale of his home, and he decides to start a second pension from the contribution as he has not fully utilised his personal transfer balance cap. This pension commencement results in a reportable credit to his transfer balance cap of $300,000. This event must be reported to the ATO via a TBAR no later than 28 October 2023.

Events that do not require reporting:

  • Pension payments
  • Investment earnings and losses
  • When an income stream ceases because the interest has been depleted
  • Death of a member
  • Family law payment splits
  • Debit events including fraud, dishonesty, or bankruptcy

Why is my transfer balance account and it’s reporting important?

As a trustee of a SMSF there is an obligation to ensure that TBA reporting is accurate and timely. It also comes as a reminder that the administration involved in running a SMSF should not be taken lightly and should be understood by all Trustees.

This change to TBAR reporting due dates highlights the need to be proactive in managing your SMSF compliance, with accounting records kept up to date on an ongoing basis rather than once a year when the annual financial statements and tax return are completed.

What happens if I lodge late?

A SMSF may be subject to compliance action and penalties if they do not lodge on time or respond to a commissioner commutation authority.

Non-compliance with a commutation authority may result in denying exempt current pension income (ECPI) claims which can impact the tax position of a member in retirement phase.

The change is intended to provide members and the ATO with more timely and accurate information in managing transfer balance accounts and caps, and therefore adverse consequences may occur that could be costly to the SMSF trustee if timely reporting is not done.

We’re here to help

Our team is based here in Australia and all administrative tasks are processed in-house. We use current technologies to streamline your data and give you up-to-date information helping you as a trustee to make informed decisions for your SMSF. Our preferred approach is to keep your SMSF accounting records up to date throughout the year, enabling timely TBAR reporting in line with the new requirements.

Please reach out to our team of experts today for advice around the administration of your self-managed super fund.

To read more about changes to Superannuation click here

Superannuation – the state of play
Superannuation – the state of play
Read this article

Subscribe to receive our publications

Subscribe now to be kept up-to-date with timely and relevant insights, unique to the nature of your business, your areas of interest and the industry in which you operate.