Overview of event-based reporting for Self-Managed Superannuation Funds
As you may be aware, there is now a $1.6 million limit per member on the amount that can be transferred into a super retirement pension. This is known as the Transfer Balance Cap (TBC) and it applies to all superannuation pensions that a member may have across all their superannuation funds.
What might be a little less known is that from 1 July 2017, all super funds including Self-Managed Superannuation Funds (SMSFs) have new reporting obligations imposed by the Australian Tax Office (ATO) in order to ensure the $1.6 million limit is measured/adhered to by members.
What events need to be reported to ATO?
A SMSF must report events that affect a member’s transfer balance. Some main events are:
- All new retirement pensions commenced after 1 July 2017 – this event is a credit or increase to the account.
- Commutation (stopping) of a pension (either partially or fully). This event is a debit or decrease to the account.
- Commutation (stopping) of a pension (either partially or fully) so that the member can roll their funds into another superannuation fund.
- Compliance with a commutation authority issued by the ATO.
- A death of a member where the remaining spouse converts their current pensions into accumulation and starts a new death benefit/reversionary pension.
Please note that all existing pensions at 30 June 2017 that continued to be paid on or after 1 July 2017 were reported to the ATO as a one off exercise at that time. It was the value at 1 July 2017 that was reported.
What does not need to be reported?
There is no need to lodge an event for a member for the following:
- Where the member has not started a retirement pension – please note that a transition to retirement pension commencement is not a reportable event.
- Ordinary pension payments made by the member – this has no effect on this cap.
- Allocation of earnings to the pension account (both positive and negative).
An SMSF should report events that arise on or after 1 July 2017, either on an annual or quarterly basis. The reporting frequency for SMSF’s depends on the total superannuation balance (TSB) of the members of a particular fund.
This is determined as followed:
If all members of the SMSF have a Total Super Balance less than $1 million on 30 June the year before the first member starts their first retirement pension:
- Is the due date of the SMSF annual return.
- J Super Fund is a SMSF with one member, being John, who has a balance of $800,000 at 30 June 2018.
- John is 65 years old and commences a retirement pension for $800,000 on 1 July 2018. As no member has a balance above $1 million and this event is during the 30 June 2019 year – the event reporting due date to the ATO is 15 May 2020 (when the return is due).
- In the above, John has $800,000 remaining of his $1.6m cap in future to start new retirement pensions.
If any member of the SMSF had a Total Super Balance of $1 million or more on 30 June the year before the first member starts their first retirement pension:
- You need to report the event by the 28th day after the end of relevant quarter.
- M & J Super Fund is a SMSF with two members, both in accumulation, being Mary who has balance of $1.2 Million at 30 June 2018 and Jo who has a balance of $400,000.
- Mary is 66 years old and commences a retirement pension for $1,200,000 on 1 July 2018. This event occurred in the July to September 2018 quarter therefore it is required to be reported to the ATO by 28 October 2018.
- In the above, Mary has $400,000 remaining of her $1.6m cap in future to start new retirement pensions.
If your superannuation pension is in a large industry, retail or public offer APRA-regulated superannuation fund – the reporting cycle is different to a SMSF (generally on a monthly basis). It will be the responsibility of the large industry fund administrators to report to the ATO.