The Australian Tax Office’s (ATO) decision to offer a quarterly option as part of a position paper on event-based reporting for the transfer balance cap (TBC) from 1 July 2018 has been endorsed by the SMSF Association.
SMSF Association CEO John Maroney says that event-based reporting, which is needed to implement the Government’s TBC legislation, is a significant shift from the current reporting arrangements, so the ATO’s move to “soft pedal” any changes by presenting advisors and their clients with two alternative approaches for comment is welcome.
“We are pleased that the ATO has listened to the SMSF industry’s immediate concerns and feedback, including ours, regarding event based reporting, and this consultation shows the ATO is willing to work with industry to get the implementation of event based reporting right for SMSFs,” he says.
In its position paper, the ATO wants feedback on these two proposals:
- TBC events reported 10 days after the end of the month. This excludes pension commencements and limited recourse borrowing arrangements (LRBA) repayments that will be reported quarterly;
- TBC events reported 28 days after the end of quarter for a proposed two-year transition period before switching to 10 days after the end of each month for everything.
Maroney says the Association is “fully aware” that some of its members have concerns about event-based reporting, and is hopeful that this process will go a long way to resolve any outstanding issues.
“With the introduction of the TBC, we believe it’s in SMSF trustees’ best interests to report information as soon as possible so details can be shared between advisors, providers and members, and therefore help prevent any notional earnings accruing on excess transfer balance determinations.
“As such, the Association supports in principle the ATO’s approach to administering this legislation, especially as the use of more sophisticated administration technology becomes even more prevalent across the industry.”
Maroney says that it’s worth noting that delays in collecting information can result in trustees being charged interest at 7% per annum above the 90-day, bank bill rate, accruing daily, on excess transfer balance accounts.
He adds that until this new proposed reporting regime starts, the responsibility for keeping track of transfer balance account transactions lies with trustees and their advisers and administrators.
“This is an onerous responsibility in the short term, and potentially on an ongoing basis, and is another reason why the Association supports a central repository of up-to-date and meaningful information for the use of members, trustees and their advisors.”