Event-based reporting case studies

Obligation to report an event no later than 28 days after the end of the quarter for a single member fund.

Note: from 1 July 2023 all SMSFs will be required to report within 28 days after the end of the quarter in which the event occurred.

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

On 20 September 2018, she 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 super balance of $1 million or more as at 30 June 2018, the SMSF is required to report these events no later than 28 days after the end of the quarter in which they occur.

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

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

Obligation to report an event no later than 28 days after the end of the quarter for all fund members.

Note: from 1 July 2023 all SMSFs will be required to report within 28 days after the end of the quarter in which the event occurred.

Fiona and Jimmy are members of an SMSF.

Fiona has a total super balance at 30 June 2019 of $500,000 and starts an income stream valued at $500,000 on 1 July 2019.

Jimmy has a total super balance at 30 June 2019 of $2 million, made up of $500,000 in the SMSF and $1.5 million in an APRA super fund.

All of Jimmy’s interests are in accumulation phase.

Jimmy starts an income stream in the SMSF valued at $100,000 on 17 January 2020.

As Jimmy had a total super balance of $1 million or more as at 30 June 2019, the SMSF is required to report these events no later than 28 days after the end of the quarter in which they occur.

The start of Fiona's income stream must be reported to us no later than 28 October 2019.

The start of Jimmy's income stream must be reported to us no later than 28 April 2020.

Obligation to report events to us no later than the self-managed superannuation annual return (SAR) for the year in which the event occurred.

Note: From 1 July 2023 the administrative concession based on member's total super balance will be removed. All SMSFs will be required to report no later than 28 days after the end of the quarter in which the transfer balance event occurred.

Gary has a total super balance of $900,000 as at 30 June 2018.

Gary starts 2 income streams valued at $500,000 and $400,000 respectively in his SMSF on 1 July 2018.

Gary continues to make contributions and, as at 30 June 2020, his total super balance is $1.1 million.

On 1 July 2020, he commutes the 2 income streams and starts a new income stream valued at $1.1 million.

As Gary has a total super balance of less than $1 million at 30 June 2018, the SMSF must report events that occur in a year in line with their SAR for that year.

They can choose to report earlier.

This requirement does not change even though his total super balance increases over time.

Gary's SMSF would need to report the 2 credits arising on 1 July 2018 no later than due date of the fund's annual return for the 2018–19 year, generally 15 May 2020.

The following events would need to be individually reported to us no later than the due date of the fund's SAR for 2020–21, generally 15 May 2022:

• each debit resulting from the commutation of the 2 pre-existing income streams
• credit arising from the new income stream.

Incomplete reporting from the SMSF has resulted in an excess transfer balance determination issuing to the member.

In 2018, Tan started a pension valued at $800,000 in her SMSF.

On 20 October 2020, Tan commuted her pension in the SMSF and started a pension in an APRA fund on 22 October 2020.

When Tan commuted her pension before rolling it over, the value of the pension had increased to $850,000.

Tan's SMSF had previously reported to us the $800,000 credit in her transfer balance account.

Tan's APRA fund reports to us the $850,000 credit in her transfer balance account before the SMSF reports the debit.

On 25 October 2020, we determine Tan has exceeded her personal transfer balance cap.

We send Tan an excess transfer balance determination.

Tan's SMSF must report to us as soon as possible the $850,000 debit that occurred when they commuted the pension.

The SMSF must also ensure they report that the pension account is closed.

Tan's SMSF reports the debit to us on 25 November 2020.

We revoke the excess transfer balance determination we have sent Tan.

If Tan's SMSF does not report the debit to us before the due date in the determination, we may send Tan's APRA fund a commutation authority.

This means, Tan is at risk of having her pension commuted in full.

Reporting a member commutation after the member has received an excess transfer balance determination.

Simon started a pension in his SMSF valued at $1.3 million on 1 July 2017.

On 30 June 2019, Simon commuted the pension in full. When Simon commuted the pension, it was valued at $1.1 million.

On 1 July 2019 Simon started a new pension valued at $1.45 million.

Simon's SMSF had previously reported the $1.3 million credit and $1.1 million debit in his transfer balance account.

Simon's SMSF lodged a TBAR on 28 October 2019 reporting the 1 July credit of $1.45 million.

On 29 October 2019 we determine Simon exceeded his transfer balance cap on 1 July 2019.

We send him an excess transfer balance determination requiring him to commute the excess and the excess transfer balance earnings by 28 December 2019.

Simon does so on 12 December 2019.

If Simon's SMSF does not report this commutation to us by 13 January 2020, we may send the SMSF a commutation authority.

Reporting an event that occurred in 2020–21 when the SAR for the year is lodged.

Note: From 1 July 2023 all SMSFs will be required to report transfer balance account events no later than 28 days after the end of the quarter in which the event occurred.

Len is a member of an SMSF that reports routine transfer balance account events in line with the SAR.

Len started a pension on 1 July 2018 valued at $640,000.

The SMSF reported that event to us when they lodged their SAR for the 2018–19 year.

Len started another pension on 1 July 2020 valued at $300,000 after making a downsizer contribution.

The SMSF will report this to us when they lodge their SAR for the 2020–21 year on 15 May 2022.

When we initially calculate Len’s personal transfer balance cap, the only event reported to and processed by us, will be the pension Len started on 1 July 2018.

Accordingly, the personal transfer balance cap, we will initially calculate as applying from 1 July 2021 will be $1.66 million. This is what will be displayed in ATO online.

In May 2022, when the pre-indexation credit is reported to us, the highest ever balance in Lens’s transfer balance account between 1 July 2017 and 30 June 2021 will increase to $940,000.

We will recalculate Len’s personal transfer balance cap, which applied from 1 July 2021 based on this information.

Len’s personal transfer balance cap from 1 July 2021 will be reduced to $1.64 million.

Not reporting a roll over commutation promptly.

Dev started a pension in his SMSF on 1 July 2018 with a value of $800,000.

On 30 March 2021, Dev commutes the pension in full. This results in a debit of $760,000.

Dev starts a pension in an APRA fund of the same value on 3 April 2021.

The APRA fund reports this credit to us on 13 April 2021.

The SMSF has not reported the commutation debit to us before 1 July 2021.

Based on the information reported to us, on 1 July 2021, the highest ever balance of Dev’s transfer balance account will be $1.56 million.

We will initially calculate Dev’s personal transfer balance cap from 1 July 2021 as $1.6 million.

When the SMSF reports the commutation debit of $760,000 to us, the highest ever balance of Dev’s transfer balance account prior to 1 July 2021 will reduce to $800,000.

We will recalculate Dev’s personal transfer balance cap from 1 July 2021 as $1.65 million.

We apply this to Dev’s affairs from that date.

Impact of falling behind in your TBAR reporting.

Joan is a member of an SMSF, that reported the $1.4 million credit arising in her transfer balance account when she started a pension on 1 July 2019.

Joan’s SMSF should be reporting most events to us no later than 28 days after the end of the quarter in which they occur.

However, she has fallen behind in her obligations and no other events have been reported to us by July 2021.

Joan has been 'rolling back' her pension, 'topping it up' and starting a new one each year.

Joan commuted the pension in full on 30 June 2020, creating a debit of $1.35 million.

She then started a new pension valued at $1.55 million on 1 July 2020.

On 30 June 2021, Joan commutes the pension creating a debit of $1.52 million and started a new pension valued at $1.35 million on 1 July 2021.

This makes the balance of her transfer balance account on 1 July 2021 $1.61 million.

Based on the reporting received, we'll initially calculate Joan’s personal transfer balance cap as $1.61 million and display this in her ATO online account.

Joan’s SMSF reports all outstanding events to us when the SMSF lodges the 2 SARs in May 2023.

When this occurs, we'll recalculate Joan’s personal transfer balance cap from 1 July 2021 as $1.6 million and determine Joan exceeded her personal transfer balance cap on that day.

Joan will need to commute the $10,000 plus the excess transfer balance earnings that have accrued between 1 July 2021 and May 2023 when the Commissioner of Taxation makes the excess transfer balance determination.

Joan will also need to pay excess transfer balance tax on the earnings that accrue between 1 July 2021 and when the excess is rectified.

Reporting an event that occurred prior to 5 April 2022.

Tracy commenced a market linked income stream in 2015. This is the only income stream Tracy has.

On 1 July 2017, the income stream was valued at $840,000. The SMSF reported that event to us via the TBAR when they lodged their SAR for the 2017–18 year.

On 30 June 2020, Tracy commuted this CDBIS, the commutation value at that time was $700,000. She used the underlying account balance to start another pension on 1 July 2020 valued at $640,000.

The SMSF has only reported the commencement of the CDBIS as they required more guidance from the ATO.

When we initially calculate Tracy’s personal transfer balance cap, the only event reported to and processed by us will be the income stream Tracy had before 1 July 2017.

To ensure that Tracy’s transfer balance is calculated correctly at the time Tracy commutes this income stream, the SMSF should report the commutation of the CDBIS with an effective date of 5 April 2022, with the commutation value of $700,000.

The SMSF should then report an account-based pension commencing on 5 April 2022 for $640,000.

Tracy's transfer balance account shows the following amounts: the original credit of $840,000, the debit $700,000 plus new credit $640,000. Tracey balance is $780,000. She is not in excess and is not required to commute any excess amounts from these income streams.

Re-reporting events that occurred prior to 5 April 2022 (commutation previously reported).

Chris was in receipt of a life expectancy CDBIS in his SMSF prior to 1 July 2017 with a value of $2,000,000.

On 30 March 2021, Chris commutes this pension and used the capital to start a new life expectancy pension. The value of the new pension at that time was $1,500,000.

The SMSF reported the commutation with an effective date of 30 March 2021. Although the value of the commutation at that time was $1,600,000, the calculation under the previous law provided for an entitlement of ‘nil’.

The fund did not report the commencement of the new pension as they required more guidance from the ATO. This is because Chris appears to be in excess of his transfer balance cap and the fund would have been unable to commute the excess from the new pension.

As the first income stream was a CDBIS, the credit did not result in an excess transfer balance.

When the fund reported the commutation, the 'nil' entitlement effectively meant that there was no debit to Chris's transfer balance account.

The value of the commutation of the CDBIS is correctly calculated as $2,000,000.

The fund needs to cancel the previously reported 'nil' commutation and re-report the commutation of the CDBIS with the value of $1,600,000 and an effective date of 5 April 2022.

This creates a debit in Chris's transfer balance account of $1,600,000. As the original credit created a balance of $2,000,000, Chris has a remaining balance of $400,000.

The fund also needs to report the commencement of the new pension of $1,500,000 with an effective date of 5 April 2022. Less Chris's transfer balance cap of $1,600,000. This will create an excess transfer balance of $300,000. Chris will receive an excess transfer balance determination, however as this is the only pension account he has, the fund can only action a commutation to remove the excess upon receipt of a Commissioner’s commutation authority (CCA).

When the fund receives the CCA, it can partially commute the pension to reduce the excess.

Chris will need to pay excess transfer balance tax on the earnings that accrue between 5 April 2022 and when the excess is rectified.

Re-reporting events that occurred prior to 5 April 2022 (commutation and new pension previously reported).

Jo was in receipt of a market linked CDBIS in her SMSF prior to 1 July 2017 with a value of $2,400,000.

On 30 May 2019, Jo commutes this pension and used the capital to start a new market-linked pension. The value of the new pension at that time was $1,800,000.

The SMSF reported the commutation with an effective date of 30 May 2019. Although the value of the commutation at that time was $2,100,000, due to the calculation formula under the previous law, the debit was valued at ‘nil’.

The fund also reported the commencement of the new pension, also with the value of $1,800,000.

As the first income stream was a CDBIS, the credit did not result in an excess transfer balance.

Under the new law the value of the commutation of the CDBIS is correctly calculated as $2,100,000.

The fund needs to cancel the previously reported 'nil' commutation and re-report the commutation of the CDBIS with the value of $2,100,000 with an effective date of 5 April 2022.

This creates a debit in Jo's transfer balance account of $2,100,000. As the original credit created a balance of $2,400,000, Jo has a remaining balance of $300,000.

The fund also needs to re-report the new pension of $1,800,000 with an effective date of 5 April 2022. Less Jo's transfer balance cap of $1,600,000. This will create an excess transfer balance of $500,000. Jo will receive an excess transfer balance determination however as this is the only pension account she has, the fund can only action a commutation to remove the excess upon receipt of a CCA.

When the fund receives the CCA, it can partially commute the pension to reduce the excess.

Jo will need to pay excess transfer balance tax on the earnings that accrue between 5 April 2022.