Recap on the ATO’s July 2017 SMSF reforms
Just as winter has arrived, EOFY is coming. The ATO’s July 2017 SMSF reforms marked significant changes to contribution and balance caps and reporting requirements. As the end of financial year approaches, I’ve put together a list of the key things you need to know. I’ll include links to the ATO website for each of the sections, so you can read the details in full.
It’s time for SMSF trustees to get their tax return and audit paperwork in order.
Some of the July 2017 SMSF reform items have reporting dates of 30 June 2018 so it’s recommended to complete and lodge the 2017 SMSF annual return this month to ensure your trustees meet the reporting deadlines.
In addition, a TBAR report is due by 30 June 2018 to advise the ATO of retirement income streams in place at 30 June 2017 that will continue into 2018.
Other reforms result in changes to what your clients can and can’t do in the 2018 financial year. Changes a plenty that will require your attention this month.
30 June 2018 reporting deadline for 2017 Annual Return
The 2017 SMSF annual return is due on 30 June 2018 (well actually 2 July due to 30 June being a Saturday)
Why is it important to meet this lodgement deadline?
• Transitional Capital Gains Tax (CGT) relief
The election to apply transitional CGT relief is made in the CGT schedule of the annual return and the election must be made by the due date for lodgement. Importantly the choice to apply relief will be denied if the annual return is lodged late.
• Transfer Balance Account Report (TBAR)
As I discuss below, a TBAR is due for lodgement on the same day. Practically, the TBAR cannot be completed until the 2017 SMSF Annual Return is completed.
What should you be doing?
– Review outstanding returns and prioritise those Funds with potential to apply transitional relief.
– Apply for further lodgement extensions where appropriate.
30 June 2018 deadline for 2017 TBAR Report
As I mentioned in an article about TBAR in February, a reporting deadline of 1 July 2018 applies for all SMSFs to report the balances of income streams being paid at 30 June 2017 that continue to be paid after 1 July 2017.
Again, practically this requires the completion of 2017 Financial Statements and Annual Return for each affected Fund.
The TBAR provides information to let the ATO track an individual’s balance for purposes of the TBC and TSB.
What do you need to do prior to 30 June 2018:
– Complete 2017 Annual SMSF Return
– Check whether your software provider facilities TBAR preparation and lodgement
– Prepare and review TBARs.
– Lodge through software provider or by paper form by 1 July 2018.
Additionally, what do you need to consider for the 2018FY?
– Determine whether your SMSF is an annual or quarterly reporter for 2018 and future years. Review ATO Guidelines.
– For those Funds with quarterly reporting, review your systems to ensure data can be collected prior to the first reporting deadline of 28 October 2018.
30 June 2018 tax and year end planning
The 2017 reforms have added extra complexity when it comes to year end tax planning for our clients. I believe the reforms have increased the risk of accountants inadvertently overlooking the interplay between TBC, TSB, TBAR, CC and NCC…
Ok, enough with the acronyms. You get the picture.
What do you need to look out for?
1. Transitional Capital Gains Tax Relief
Did you apply transitional relief to SMSF assets and deferred capital gains in 2017? Have your clients since disposed of those assets in 2018 FY? If so deferred tax may be payable in 2018.
2. Total Super Balances (TSB)
Review members with total member balances over $1.4M as at June 2017. Their ability to make and receive certain contributions may be limited. See ATO Guidelines for more information.
3. Concessional Contribution Caps
A reminder that concessional contributions for all are capped at $25,000. And a work test still applies for those members age 65 or over at time of making the contribution. See ATO guidelines for more information.
4. Personal Superannuation Deductions
Individuals can now claim a deduction for personal contributions to super even if employed, up to the combined concessional limit. Review clients that may wish to make use of this change. See ATO Guidelines for further information.
5. Non-Concessional Contribution Caps
Accountants need to be aware of what cap may apply to their clients. Have they triggered a transitional cap under the previous rules or do they start afresh with the new cap limits? Or does their Total Super Balance restrict their ability to contribution?
Sound complex? Yes, it can be. See ATO guidelines for more information.
6. Transition to Retirement Income Streams (TRIS)
Review clients with a TRIS as at 30 June 2017. Are they able to convert to an exempt TRIS or a full account-based pension? Do they still wish to receive a pension if the TRIS is non-exempt?
If you have concerns about any of your clients’ SMSFs under these July 2017 reforms, please give me a call on 02 4961 2788 to discuss. We can make a plan to sort out any issues as early as possible.