Self Managed Super Funds – update to member reporting requirements

If your investments are in a Self Managed Super Fund (SMSF) you need to be aware of a change in reporting requirements that for events that affect member transfer balance accounts.

From 1 July 2018 the Australian Taxation Office (ATO) introduced the concept of event based reporting which allowed the ATO to administer the Transfer Balance Cap – the cap that details the amount a member can have in a retirement income stream.

A SMSF must report events that affect a member’s transfer balance account. Common events include:

• Details of when a member commences a retirement income stream (account-based pensions etc) – such details would include type of income stream, the value and start date;
• Details including value, of commutations of retirement income streams, including commutations of a pension before it is rolled over to another fund. Commutations are when an income stream is either fully or partially converted to a lump sum.

If no events occur then there are no events to report.

Up until 30 June 2023 the timeframes for events reporting are based upon a member’s total super balance.

If a SMSF has any members with a total super balance of $1m or more on 30 June in the year before the first member starts their first retirement phase income stream, then the super fund must report events affecting the members transfer balance within 28 days after the end of the quarter in which the event occurs.

When all members of an SMSF have a total super balance of less than $1m the super fund can report this information at the same time as when the super fund tax return is due.

Changes coming into effect from 1 July 2023

The above will change on 1 July 2023 when all SMSFs will be required to report transfer balance events within 28 days after the end of the quarter in which the event occurred.

In addition, all events for the 2023 financial year will be required by 20 October 2023, not by the tax return due date of lodgement, May 2024.

Trustees have an obligation to ensure:

• Transfer balance reporting is true and correct;
• The commencement and commutation of retirement income streams is supported by contemporaneous records (minutes etc);
• Payments to members have been correctly characterised at the time the payment was requested, to allow trustees and auditors to ensure minimum pension payment standards have been met;
• Transfer balance account reporting in relation to commencement and commutation of retirement income streams aligns with the exempt current pension income claim made each year within the income tax return, which allows super funds fully in pension phase to pay no income tax.

What do trustees need to do?

From 1 July 2023 it will be essential that trustees are fully across all transactions on a quarterly basis to ensure that if reporting needs to be done, it can be done. As indicated above, annual reporters may have lodgement obligations as early as October 2023 for all events in the period 1 July 2022 to 30 September 2023.

Trustees will have to adopt a financial reporting strategy to achieve this requirement.

WLF already offers this service as part of ongoing compliance assistance. This is via a fixed price agreement which defines a clear scope including quarterly reporting, annual reporting, income tax return preparation and lodgement and transfer balance cap reporting where required. The arrangement offers value for money and assist trustees in meeting their overall obligations. Our focus at WLF is to keep trustees safe.

If you are not already availing yourself of this service we encourage you to contact your WLF Advisor to discuss your specific circumstance and how we might assist you in your SMSF reporting compliance.