What to check during the SMSF’s annual audit
Since transfer balance cap reporting commenced for self-managed superannuation funds (SMSFs), the ATO has seen a high level of re-reporting from the sector.
This is mostly in response to determinations and commutation authorities we have issued.
In some instances, the amended reporting indicates:
- the member was not actually receiving a pension during 2017–18
- the pension was commuted on 1 July 2017 so that the member was never in excess
- the member had commuted the pension before 1 July 2017 to avoid being in excess and the trustees had incorrectly included the commuted amount in their original reporting to us
- the member commenced a pension during 2017–18 however the initial value reported to us has been amended so that the individual no longer exceeded their transfer balance cap.
The amended reporting usually results in the determination or commutation authority being revoked. Approximately 39% of the commutation authorities issued to SMSFs in the last 12 months since were revoked, including commutation authorities issued to APRA funds after SMSFs had corrected reporting errors.
What to check during an audit
Due to the large number of amended transfer balance account reports (TBARs) the ATO is receiving for SMSFs, SMSF auditors are reminded it is important to check the following in the case where a member received a pension during 2017–18:
- that an appropriate condition of release was met
- that the pension is valued correctly in the financial statements
- the commencement date of the pension and any commutations have been properly documented
- exempt current pension income (ECPI) has been correctly calculated with respect to the pension and any commutations which occurred during the year have been considered
- the payments from the pension have actually been paid
- the minimum pension payment requirements have been met.
Trustees have an obligation to ensure that their TBAR reporting is:
- true and correct
- supported by the correct documentation
- aligns with their ECPI claim for a year
Any TBAR re-reporting by SMSF trustees for future income years will be closely monitored by the ATO. They may request evidence of relevant documents and calculations to substantiate the TBAR amendment.