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What SMSFs need to know about the new ATO real time reporting

One of the rules is a new $1.6 million transfer balance cap that limits the value of assets in a super fund linked to a pension to this amount.



Self-managed super fund (SMSF) trustees once had to prepare their accounts on a quarterly or annual basis, however the Australian Taxation Office (ATO) is introducing new measures to require funds to report some financial information on a real time basis.

While the measure is still in proposal stage, it’s likely the new arrangements will apply from 1 July 2018.

The new rules were introduced as part of a sweeping program of super system reforms, most of which came into effect on 1 July this year.

One of the rules is a new $1.6 million transfer balance cap that limits the value of assets in a super fund linked to a pension to this amount.

This rule is one reason why the ATO has introduced real time reporting: trustees need to be able to value the assets in the fund in a timely way to ensure they don’t breach this rule.

As Damian Liddell, a financial adviser with Browell’s Financial Solutions outlines, under the new rules trustees will need to report to the ATO events that impact a fund member’s transfer balance account.

“As a result of the new rules, trustees will now need to report to the ATO that they have started an income stream within 28 days after the end of the quarter,” he says.

Trustees must report they have commuted a pension within 10 business days after the end of the month in which the commutation occurs.

It is understood the ATO is still in discussion about exactly how real time reporting will work.

Liam Shorte, SMSF specialist with Verante Financial Planning, says there has been some lobbying within the SMSF sector for a carve out for smaller funds.

“This may eventually lead to a few different reporting tiers. Some funds are likely to need to report financial information in real time and others may not have to,” he advises.

As a result of the new rules, it’s important for trustees to work with their accountant and super fund administrator now to ascertain how to manage the new reporting regime before July 2018 so they are familiar with any new processes for their fund.

“Trustees need to be aware that now they will have to identify and work with their administrator on the reporting of any pension payments that they wish to treat as a lump sum commutation rather than an income stream throughout the year,” says Shorte.

“Many trustees withdraw amounts from their fund regularly and at the end of the year discuss with the accountant which payments to treat as income streams and which to treat as commutations. Under the new regime they will have to decide in advance and liaise much more closely with their SMSF adviser before taking payments,” he adds.

Where to begin


A good start for SMSF trustees is to decide if their circumstances mean any payment above the minimum required pension should be treated as income stream payments or commutations.

“Now may be the time to move to a quarterly check in with your adviser to ensure any changes in circumstances have been picked up. A quick call or email three to four times a year advising of your income needs and classifying payments out of the fund should take no more than 15 minutes, but will save a lot of headaches over time,” Shorte advises.

He also recommends trustees become very familiar with adding more detail into the reference section of payments made on their bank account to be able to keep accurate records.

Liddell says to prepare, trustees are required to ensure they have good reporting and record keeping systems in place. “Trustees do need to report events to the ATO in time or it may impose penalties.”

He warns that trustees will no longer be allowed to wait until they have lodged their annual return to report information about pensions.

“Depending on the assets within the fund, some people may also find it difficult to report the true market value of an asset, for instance property.”
 
According to Liddell, members drawing a pension payment of more than the minimum amount may want to consider withdrawals above the minimum as commutations to maximise the amount in the pension account.
 
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