Regulations Introduced On Transfer Balance Account Reporting (TBAR)

Regulations Introduced On Transfer Balance Account Reporting TBAR

When it comes to the Transfer Balance Cap (TBC), some regulations were introduced that came into effect on 5 April 2022.

With this update, the members can now commute excess transfer balance amounts from income streams, legacy pensions, and market-linked pensions.

Self Managed Super Funds (SMSFs) will get impacted if any of their members held a Capped Defined Benefit Income Stream (CDBIS) and were later commuted to purchase a life expectancy pension or annuity, or market-linked pension or annuity.

CDBIS is a:

  • Lifetime pension that commenced before and after 1 July 2017
  • Life expectancy pension, annuity, or market-linked pension commenced prior to 1 July 2017

Rules Applicable When Reporting The Valuation

A member must use the reported value from the actual date the event occurred and not from the reported effective date when reporting the valuation.

If you are not able to understand the change and find yourself impacted, seek the assistance of a professional tax accountant.

To provide support to people in understanding the valuation change, the Australian Taxation Office will not be considered late lodgement penalties where:

  • a member is required to report a transfer balance event
  • the due lodgement date for the event is prior to 1 January 2023
  • a member lodge the TBAR by 1 January 2023

Advice To SMSF Members Regarding Reporting

All self-managed super funds are required to commence the reporting soon as some of the members will accrue an excess transfer balance tax liability.

The ATO recommends providing members with advice about:

  • Amount of excess transfer balance tax calculated
  • Accrues from the date of the transfer balance debits and credits
  • Wait for the ATO to issue a commutation authority to the fund
  • Funds are permitted to use the new exception to the commutation rules
  • Members commuting from a non CDBIS income stream don’t need a commutation authority

So, these are some regulations introduced on Transfer Balance Account Reporting (TBAR), allowing the fund members to commute excess transfer balance amounts from income streams, legacy pensions and market-linked pensions.

For more information, talk to our tax accountants at KPG Taxation.

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