Expert SMSF insights
Should TBARs include 30 June ‘17 accumulation phase values?
By Mark Ellem
Central to the new event-based reporting regime is a ‘transfer balance account report’ (TBAR).
It’s generally understood that a TBAR would include a member’s ‘retirement phase pension(s) value’ (RPV) as at 30 June 2017. But should an ‘accumulation phase value’ (APV) of the same date also be included? Uncertainty around this has now been cleared up by the ATO.
When does a 30 June ‘17 APV need to be reported?
It needs to be reported via a TBAR where the member has one of the following pensions at 30 June 2017:
- Lifetime complying pension (SIS regulation 1.06(2))
- Life expectancy (also known as fixed term) pension (SIS regulation 1.06(7))
- Market-linked (also known as term allocated) pension (SIS regulation 1.06(8))
- Flexi pension (SIS regulation 1.06(6))
The first three pensions listed above are also ‘capped defined benefit income streams’ (CDBIS), which for ‘transfer balance cap’ (TBC) purposes use the ‘special value’ calculation for ‘transfer balance account’ (TBA) credits and debits. Whilst a flexi pension is not a CDBIS, the value for TBC purposes is calculated using the rules set out in the Income Tax Act Regulations and not the account balance.
Whether or not to report? Let’s look at examples
Let’s look at five SMSFs, their situation as at 30 June 2017, and whether an APV must be reported.
Where a member’s 30 June ‘17 APV is not provided via a TBAR, the ATO will calculate it as the difference between the closing balance for the member, as reported in the member section of the SMSF annual return, and the value of the member’s transfer balance account balance as at 1 July 2017.
Member has accumulation phase interests only
It is not mandatory to provide the 30 June 2017 APV.
It is only required where the difference between the APV and the closing account balance reported on the SMSF annual return (member section) is not limited to the value of the administration and exit fees if the member was to voluntarily cease the interest. That is, if the member’s withdrawal balance is less than the closing balance, then the APV can be reported. This is usually due to the fact that SMSF accounts are prepared on a ‘market value’ basis and not a ‘net market value’ basis and consequently do not take into account asset selling costs. We would expect that this would only be reported where the member’s closing balance of both APV & retirement phase value (RPV) is slightly over one of the TSB trigger points at 30 June 2017 – $1.4m, $1.5m, $1.6m.
Member has retirement phase interests only, comprising account-based pensions and no flexi pensions or CDBIS
The 30 June 2017 APV is not required as the closing account balance from the SMSF annual return (member section) is equal to the TBA balance at 1 July 2017.
Member has retirement phase interests only, comprising at least one CDBIS or flexi pension
The 30 June 2017 APV is required for affected members to ensure the SMSF annual return closing account balance is not used. The APV value to be supplied is zero.
Member has accumulation phase together with retirement phase interests comprising account-based pensions only and no flexi pensions or CDBIS
In most instances, the 30 June 2017 APV is not required to be reported. Only provide the 30 June 2017 APV where subtracting the TBA at 1 July 2017 from the SMSF closing account balance does not provide a value that varies from the true APV by only the value of the administration and exit fees if the member was to voluntarily cease the interest (refer to comments above at SMSF #1).
Member has accumulation phase together with retirement phase interests comprising at least one CDBIS or flexi pension
The 30 June 2017 APV is required for affected members to ensure the SMSF annual return closing account balance is not used.
If the 30 June 2017 APV needs to be reported, then what is the due date?
Whilst a 30 June 2017 RPV needs to be reported by 1 July 2018, an APV for the same date is not required until 8 September 2018. Where a member has both valuations to be reported, the fund has a couple of options:
- Report both by 1 July 2018
- Report separately – the RPV by 1 July 2018 then the APV by 8 September 2018
What about reporting 30 June 2018 APV?
It is only the 30 June 2017 APVs that must be reported via a TBAR.
The 2017/18 SMSF annual return has been modified with new labels added for the reporting of APV for members. TBARs will not be required to report APV from the 2017/18 financial year onwards.
More about TBAR
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