Self-managed superannuation fund (SMSF) advisers and accountants may struggle to cope with the upcoming transfer balance account reporting (TBAR) system, according to Class.
The SMSF administrator’s latest SMSF report said the volume of reporting by SMSFs under the TBAR system could rise by 340 per cent, driven by a surge in pension commutations.
The TBAR system is part of the second wave of super reforms that includes the $1.6 million cap on the amount that can be transferred to the pension phase, which the TBAR will police.
Class chief executive, Kevin Bungard, said the volume of reporting required was much bigger than what most people thought and without the right technology in place advisers could sink.
“The industry and the ATO [Australian Taxation Office] are discussing how the impact on SMSF administrators will be managed but TBAR reporting will not go away because it’s vital to the integrity of the new super reform pension caps,” Bungard said.
“It is absolutely essential that SMSF accountants and administrators have highly efficient reporting and administration in place to be able to promptly and accurately report this information to the ATO.”
The TBAR requires commutations and establishments of super pensions to be reported in the month and quarter after they occur, which Class said was a dramatic tightening of the current rules where reporting was often two years after the SMSF annual return was lodged.
Class said the major reason for the higher reporting volume was that over 50 per cent of SMSF pensioners drew more than their required minimum per year.
“Many of those are likely to perform additional commutations to maintain room under the $1.6 million cap for extra contributions,” Class said.
Commenting, Verante financial planning and SMSF specialist, Liam Shorte said the commutation strategy would be very popular as any amount of $5,000 or above overdrawn from a pension was likely to be commuted.
“Advisers will recommend this move to ensure maximum availability of remaining pension caps just in case they are needed later,” he said.
The report noted that pension establishments would also contribute significantly to the reporting requirements as many pensioners had multiple pensions.