- What is the TBAR, and why was it introduced?
- How often do SMSFs really need to be concerned with TBARs?
- Do pension payments and other withdrawals need to be reported?
- What needs to be reported in a TBAR and when?
- How the TBAR operates: 4 examples
- What does quarterly v annual reporter mean for your fund?
- About the author: Meg Heffron
- For more information…
Guest contributor: Meg Heffron, the author of this article, is co-founder and a Director of Heffron SMSF Solutions – a firm that specialises in SMSFs. She is a qualified actuary with more than 25 years of superannuation experience.
It would be hard for anyone interested in SMSFs to have missed the fact that a number of tax rules changed on 1 July 2017 and the new challenges and opportunities have been reported extensively in SuperGuide already.
One change about to bite for the first time is the new reporting regime for super pensions – the Transfer Balance Account Report (TBAR). Sadly, this has nothing to do with skiing (even of the Spending the Kids’ Inheritance variety) and everything to do with reporting to the ATO about a range of events (mostly to do with pensions) in a superannuation fund.
This article is designed to help those who have to think about this reporting – trustees of, and advisers to, SMSFs. Remember that SMSFs and large funds often have different deadlines when it comes to reporting and TBARs are no different.
Anyone who has superannuation in a large super fund might therefore find that the reporting cycle for that fund is quite different to an SMSF. TBARs are the responsibility of the trustee of the fund, not its members, so anyone belonging to a large fund is not required to lodge a report for their pensions in that fund.
What is the TBAR, and why was it introduced?
Since 1 July 2017 there has been a limit on the amount that can be put into a ’retirement phase’ pension in superannuation. A retirement phase pension is basically any pension other than a transition-to-retirement pension – so, as a general rule, it’s a super pension paid to someone who has retired, reached 65, inherited a pension from a spouse who has died, or is receiving a pension after becoming permanently disabled.
This limit is called the Transfer Balance Cap and it is currently $1.6 million across all retirement phase pensions in all funds over the individual’s lifetime. (For background information on the $1.6 million cap, see SuperGuide article Definitive guide to the $1.6 million transfer balance cap.)
The ATO will be policing the Transfer Balance Cap, so they need to know about anything that affects how much of it has been “used up” – hence the Transfer Balance Account Report (TBAR).
The TBAR is a way of reporting a number of things but mainly it is concerned with super funds reporting to the ATO when certain events occur, and also reporting the amounts involved in those events. Super fund trustees must report to the ATO, using a TBAR, when the following events occur:
- a new pension starts
- a transition-to-retirement pension becomes a retirement phase pension
- some or all of an existing retirement phase pension stops (called a commutation)
- a pension is transferred to another person because their spouse has died (called ‘reversion’);
- some other special events that affect the Transfer Balance Cap
How often do SMSFs really need to be concerned with TBARs?
If you super fund doesn’t run a retirement phase pension, and didn’t do so at all between 30 June 2017 and today, then Transfer Balance Account reporting is not relevant for your fund at this time.
TBARs are a hot topic right now because all funds providing retirement phase pensions as at 30 June 2017 have some reporting to do. That’s a lot of super funds. Reporting requirements for these super funds are set out later in this article.
But let’s think about a fund that doesn’t provide super pensions yet, but starts them in the future.
Let’s say there are two members, they both start pensions when they retire and nothing fancy happens after that time. It’s entirely possible that the SMSF would lodge very few TBARs – two (one each) when the pensions start and one or two more when:
- the first member dies and his or her pension is transferred to the surviving spouse; or
- when they wind up their fund while they are both still alive and transfer to a public fund.
Generally speaking, the only other events that might need to be reported via a TBAR for this fund would be:
- re-set of retirement phase pension (or commencement of another one) to include new super contributions made the previous year
- when a lump sum is withdrawn from the retirement phase pension account (which is known as a partial commutation.
Note: Partial commutations, where part of the pension account is withdrawn as a lump sum rather than a pension payment, might be more common in the future as a partial commutation reduces the amount counted towards an individual’s Transfer Balance Cap. Many people who will potentially inherit a superannuation pension from their spouse in the future will take partial commutations rather than larger super pension payments to make sure they have as much of their cap available in the future. (For information on the impact on death benefits, see SuperGuide article Definitive guide to the $1.6 million transfer balance cap.)
Do pension payments and other withdrawals need to be reported?
Importantly there is no need to report:
- pension payments every month, quarter or year; or
- payments from a member account that is not a retirement phase pension (for example, a withdrawal from an accumulation account – money that has not been converted to a pension).
Note: Although regular pension payments and lump sum payments from a fund member’s accumulation account are not reportable events, a partial commutation of the retirement phase pension account (explained earlier) is a reportable event.
Looking forward, while TBARs are relevant for a great many SMSFs right now, they won’t be a major issue for most funds in most years in the future.
What needs to be reported in a TBAR and when?
TBARs for SMSFs are not relevant all the time but when they are relevant, it pays to be on top of them. Reporting requirements can be divided into two categories – retirement phase pensions in existence as at 30 June 2017, and new events on or after 1 July 2017.
Pre-existing pensions (in existence at 30 June 2017)
Let’s look firstly at those with retirement phase pensions at 30 June 2017 (pre-existing pensions).
All SMSFs must report these pensions by 2 July 2018. The size of the members’ balances and size of the pension is irrelevant – all SMSFs have the same reporting deadline.
Remember that transition-to-retirement pensions don’t count – they are not retirement phase pensions.
So the TBA reporting requirements for existing SMSFs are simple, clear and looming!
New events on or after 1 July 2017
But what about events that happen on or after 1 July 2017? This is where it gets a little trickier.
The first step is to determine whether a super fund is a ’quarterly reporter’ or an ‘annual reporter’ – the relevance of this classification is explained below.
Annual reporter: To work out whether a particular SMSF is an ‘annual reporter’, the following process applies:
- identify the first event that triggers a TBAR from that fund (for example, the first time a retirement phase pension commences in this fund on or after 1 July 2017, or the presence of a pre-existing pension);
- work out all fund members’ Total Superannuation Balances (see explanation below) at the 30 June prior to the event (or 30 June 2017 if the trigger is the existence of a pre-existing retirement phase pension); and
- if every member has a Total Superannuation Balance of less than $1 million at that time, the fund is an annual reporter.
Quarterly reporter: All other super funds are quarterly reporters. (For more information on quarterly and annual reporters, see SuperGuide article TBAR – Transfer balance account reporting for SMSFs.)
Note: Broadly speaking, an individual’s Total Superannuation Balance is the total amount they have in superannuation across all their funds – not just their SMSF. (For more information on Total Superannuation Balance, see SuperGuide article What is included in my Total Superannuation Balance, and when does it apply?.)
How the TBAR operates: 4 examples
Example 1: Jane had $900,000 in a retirement phase pension in her SMSF at 30 June 2017. There are no other members of the fund and Jane does not have any superannuation in any other fund. The trustee of her fund must report this super pension by 2 July 2018. In future, if more events requiring TBARs occur, her fund will be an annual reporter (see the table below for what this means for events occurring on or after 1 July 2017).
Example 2: If Jane’s retirement phase pension had been $1.1 million rather than $900,000 at 30 June 2017, her SMSF would be a quarterly reporter for future events but the pre-existing pension would still only need to be reported by 2 July 2018. This would be the case even if the extra $200,000 was:
- in another fund entirely (not her SMSF); and/or
- in accumulation phase rather than in retirement phase.
Example 3: What if Jane’s pension was $900,000 as per Example 1, but her husband Peter was also a member of the fund and had a Total Superannuation Balance of $1.3 million? Their SMSF would be a quarterly reporter (because at least 1 member had more than $1 million at the date applicable to their first reporting event). This would be the case even if Peter’s balance was:
- largely in another fund (if he is a member of the SMSF his Total Superannuation Balance counts);
- not yet providing a retirement phase pension.
Example 4: Neither Jane nor Peter had retirement phase pensions at 30 June 2017. The first time either commenced a pension was 1 July 2019. In this case they would be a quarterly reporter if at least one of them had a Total Superannuation Balance of $1 million or more at 30 June 2019.
Important: The quarterly versus annual reporting test is only carried out once – if the first TBAR event occurs at a time when all members had less than $1 million in superannuation at the previous 30 June, the super fund will be an annual reporter forever. The fact that their balances grow in the future won’t mean the fund becomes a quarterly reporter.
What does quarterly v annual reporter mean for your fund?
Quarterly or annual TBAR reporting determines when the TBAR must be lodged for different events. The timing is set out in the table below.
Note: The events listed in the table below are the most common events that give rise to TBARs. There are some others that are less common that have different deadlines.
Important: A final point to note is that the table below shows the latest possible time an SMSF can lodge its TBAR. In fact, the fund might choose to lodge the report earlier. This is particularly relevant where a member is winding up their SMSF pension and moving to a public fund to start a new pension. The public fund will report the new pension within 10 days of the end of the month in which the pension starts. It is therefore well worthwhile reporting the fact that the old pension has stopped in a similar (or earlier) timeframe. Otherwise the ATO will double count this money.
|Deadlines for Transfer Balance Account Reports (TBARs)|
|Annual reporters||Quarterly reporters|
|Pre-existing pensions (pensions in place on 30 June 2017)||2 July 2018||2 July 2018|
|New pension events in 2017/18:
||No later than the due date for the 2017/18 annual return (generally October 2018 for funds with a poor lodgement history, February 2019 for new funds and May 2019 for everyone else)||28 October 2018|
|New pension events after 1 July 2018||No later than the due date for the annual return for the year in which the event occurs.
Example: A pension starting on 1 July 2020 should be reported no later than the due date for the 2020/21 annual return)
|No later than 28 days after the end of the quarter in which the event occurs.
Example: A pension starting on 1 July 2020 should be reported no later than 28 October 2020. A pension starting 1 day earlier on 30 June 2020 should be reported no later than 28 July 2020.
Meg Heffron is a Director of Heffron SMSF Solutions – a firm that specialises in SMSFs. She co-founded Heffron SMSF Solutions in 1998. Meg is a qualified actuary with more than 25 years of superannuation experience and she is passionate about demystifying SMSFs. In her utopian world, Australia’s best retirement structure is accessible to anyone who wants an SMSF and the professionals who work with SMSFs do so with confidence.
For more information…
For more information about the $1.6 million transfer balance cap, and TBARs, see the following SuperGuide articles: