28 Aug ATO update on Excess Transfer Balance (ETB) determinations
Excess transfer balance occurs when the amount you transfer into retirement phase exceeds your transfer balance cap. This is the sum of the amount that exceeds your transfer balance cap and the earnings on the excess amount.
The ATO has started issuing excess transfer balance (ETB) determinations to SMSF members based on information reported to them.
However, ATO has outlined some situations where incorrect reporting may occur in issuing excess transfer balance determination. ATO has provided steps for rectifying these errors.
According to ATO, there are situations where information reported to them are incorrect or incomplete and they have outlined what steps to take.
ATO said that they have seen some members exceeded their transfer balance cap (TBC) because they did not act to reduce the value of their pensions in their SMSF before 1 July 2017. While, other members exceed their TBC because they didn’t take into account all their pensions across all their funds, including capped defined-benefit income streams such as lifetime.
ATO stated that for members with lifetime, or similar capped defined-benefit pensions, they should be aware that these pensions are not included in the default commutation notice included with the member’s determination. The reason is that ATO does not send commutation authorities to capped defined-benefit pensions.
ATO also said that the SMSF will need to lodge transfer balance account reports (TBARs) to cancel the incorrect information and provide the correct information as soon as possible if information reported to them by the SMSF is incorrect.
If members want to request an extension of time, ATO will issue a revoked or amended determination once they have received and processed the new information.
Some scenarios that ATO shared is where the information reported by the SMSF is complete. One example given is that a member was in excess at 1 July 2017 and has not reported any subsequent commutations that reduced or rectified the excess
Another scenario that ATO explained is that as at 1 July 2017, the member was in excess and has started an additional retirement-phase income stream, which will increase the amount they’re in excess during the determination period.
More scenarios shared by ATO and how to rectify them are as follows:
Scenario A: Information is incomplete where the member has rolled over their interest to an APRA fund, but they have not reported the initial pension or the debit when the pension was commuted before it was rolled over
Rectification: An SMSF needs to lodge a TBAR providing the correct information for all events that occurred between the day the member went into excess and the day the ATO made the determination.
Scenario B: Information reported to the ATO by another fund is complete or incorrect.
Rectification: The member will need to talk to the other fund to understand why they’ve reported this information. If the fund agrees they’ve made a mistake, they’ll need to correct their reporting.
Scenario C: Structured settlement contribution hasn’t been taken into consideration
Rectification: The member will need to advise ATO of this using a transfer balance event notification form if the structured settlement contribution was made to the SMSF before 1 July 2007.
ATO also said that where the structured settlement contribution was made between 1 July 2007 and 30 June 2017, the SMSF should already have reported this on their member contribution statement.
“They’ll need to check they reported the contribution to us as a structured settlement contribution and may need to contact us to check their reporting. If the structured settlement contribution was made to the SMSF on or after 1 July 2017, they need to report this to us via a TBAR form.” the Tax Office said.
Reference:
https://www.smsfadviser.com/news/16844-ato-offers-tips-on-excess-transfer-balance-errors
https://www.ato.gov.au/Individuals/Super/In-detail/Withdrawing-and-using-your-super/Excess-transfer-balance/
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