Latest News

Hot Issues
spacer
Aged care report goes to the heart of Australia’s tax debate
spacer
Removed super no longer protected from creditors: court
spacer
ATO investigating 16.5k SMSFs over valuation compliance
spacer
The 2025 Financial Year Tax & Super Changes You Need to Know!
spacer
Investment and economic outlook, March 2024
spacer
The compounding benefits from reinvesting dividends
spacer
Three things to consider when switching your super
spacer
Oldest Buildings in the World.
spacer
Illegal access nets $637 million
spacer
Trustee decisions are at their own discretion: expert
spacer
Regular reviews and safekeeping of documents vital: expert
spacer
Latest stats back up research into SMSF longevity and returns: educator
spacer
Investment and economic outlook, February 2024
spacer
Planning financially for a career break
spacer
Could your SMSF do with more diversification?
spacer
Countries producing the most solar power by gigawatt hours
spacer
Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
spacer
Quarterly reporting regime means communication now paramount: expert
spacer
Plan now to take advantage of 5-year carry forward rule: expert
spacer
Why investors are firmly focused on interest rates
spacer
Super literacy low for cash-strapped
spacer
Four timeless principles for investing success
spacer
Investment and economic outlook, January 2024
spacer
Wheat Production by Country
spacer
Time to start planning for stage 3 tax cuts: technical manager
spacer
Millions of Australians lose by leaving savings in default MySuper funds
spacer
Vanguard economic and market outlook for 2024: A return to sound money
spacer
An investment year of ups and downs
spacer
How to tame the market's skewness
spacer
The Countries that Export the Most Wine in the World
spacer
Tips for preparing for the best tax outcomes
Article archive
spacer
Quarter 4 October - December 2023
spacer
Quarter 3 July - September 2023
spacer
Quarter 2 April - June 2023
spacer
Quarter 1 January - March 2023
spacer
Quarter 4 October - December 2022
spacer
Quarter 3 July - September 2022
spacer
Quarter 2 April - June 2022
spacer
Quarter 1 January - March 2022
spacer
Quarter 4 October - December 2021
spacer
Quarter 3 July - September 2021
spacer
Quarter 2 April - June 2021
spacer
Quarter 1 January - March 2021
spacer
Quarter 4 October - December 2020
spacer
Quarter 3 July - September 2020
spacer
Quarter 2 April - June 2020
spacer
Quarter 1 January - March 2020
spacer
Quarter 4 October - December 2019
spacer
Quarter 3 July - September 2019
spacer
Quarter 2 April - June 2019
spacer
Quarter 1 January - March 2019
spacer
Quarter 4 October - December 2018
spacer
Quarter 3 July - September 2018
spacer
Quarter 2 April - June 2018
spacer
Quarter 1 January - March 2018
spacer
Quarter 4 October - December 2017
spacer
Quarter 3 July - September 2017
spacer
Quarter 2 April - June 2017
spacer
Quarter 1 January - March 2017
spacer
Quarter 4 October - December 2016
spacer
Quarter 3 July - September 2016
spacer
Quarter 2 April - June 2016
spacer
Quarter 1 January - March 2016
spacer
Quarter 4 October - December 2015
spacer
Quarter 3 July - September 2015
spacer
Quarter 2 April - June 2015
spacer
Quarter 1 January - March 2015
spacer
Quarter 4 October - December 2014
Quarter 1 of, 2019 archive
spacer
When super isn't compulsory
spacer
Investors brace for Brexit - deal or no deal
spacer
ATO identifies SMSF contravention red flags
spacer
Extra website resources and tools is one way we offer you and your family more.
spacer
Tax and estate planning traps flagged with pension restructures
spacer
A checklist for a healthy financial year
spacer
High-risk LRBAs, TBAR on the ATO’s radar this year
spacer
All you need to know about how Australia is going.
spacer
Royal Commission report makes super fee recommendations
spacer
Four tips for boosting your super balance
spacer
New Year resolutions, New Year strategies
spacer
Part 4 - The major benefit of ‘behavioural coaching'
spacer
3 tips for weathering the market's bumpy ride
spacer
Common BDBN ‘pitfalls’ flagged in wake of ASIC action
spacer
Case law points to ‘growing importance’ of SMSF document chain
spacer
How Australia is performing.
spacer
Global outlook summary: Down but not out
spacer
Australia - a comprehensive run-down of our vital statistics.
spacer
Your guide to smarter holiday reading
spacer
Verifying asset values in a SMSF.
spacer
Admin, BDBN errors flagged for SMSFs this year
spacer
ATO targets non-arm's length income - NALI
spacer
Retiring in their 30s or 40s?
High-risk LRBAs, TBAR on the ATO’s radar this year

LRBA - Limited recourse borrowing arrangements

TBAR - Transfer balance account reporting

       

 

With LRBAs and TBAR two of the major focus areas for the ATO this year, the tax office has announced plans to contact trustees with high concentration risk in their funds and toughen its stance on misreporting.

ATO assistant commissioner Dana Fleming said that while there are a few different areas that the ATO is monitoring following the reforms to the superannuation sector, riskier limited recourse borrowing arrangements (LRBAs) and failures with reporting under the transfer balance accounting reporting regime are two areas it rates as medium or high-risk.

LRBAs

Ms Fleming said that the ATO has concerns about the existing population of SMSFs that may have entered into LRBAs on the basis of poor or conflicted advice, as seen recently in the royal commission and ASIC reports 575 and 576 that were released last year.

“The main point that I’d like to make here is that 95 per cent of LRBAs are for real property, and 30 per cent of them are secured with personal guarantees, which means that the personal assets of the SMSF members are at risk if they are unable to meet the obligations of that LRBA,” Ms Fleming said.

“We have also identified examples of concentration risk, and what I mean by that is that over 90 per cent of the assets in the SMSF are in one property. In the current landscape of the declining property market, particularly in Melbourne and Sydney, that does cause us concerns.”

Ms Fleming said that the ATO’s response in this area will partly depend on the outcomes of the report to be handed down by the Council of Financial Regulators on whether the use of LRBAs poses risks and the upcoming election.

“In the interim, however, we do think there are some risks in the current population. Trustees are legally obliged under the SIS Act to consider appropriate diversification and liquidity risk within their SMSF,” she noted.

“Where we identify these cases of concentration risk, we will be writing to trustees to ensure they have adequately understood and mitigated these risks. We recognise that trustees may have well in place an adequate strategy that deals with these risks, but we’re not sure [at this point].”

Transfer balance account reporting (TBAR)

While Ms Fleming acknowledged that the 2018–19 financial year has been a transitional year for the SMSF industry in terms of transfer balance account reporting, the ATO has identified a couple of areas of concern.

“We have found high levels of re-reporting after the ATO has already issued a determination or a commutation authority,” she said.

In most cases, she said, the re-reporting has either amended the starting value of the pension, reported a commutation of a pension on the same day it started or removed the pension completely.

“We’ve revoked around 40 per cent of commutation authorities as a result of re-reporting,” she said.

“However, from 1 July this year, we will be following up with funds where a member is prima facie in excess of their transfer balance cap and their SMSF re-reports after we have issued the member with a determination or a commutation authority to the SMSF such that miraculously an excess no longer exists.”

Another problem area is the reporting of capped defined benefit income streams.

“In 2018, around 86 per cent of the SMSFs reporting a capped defined benefit stream have failed in their reporting obligations,” she said.

“This last one is a new obligation imposed on trustees and I think it just signals to us a lack of awareness about the need to report.”

Ms Fleming said that it’s important to remember that even if the fund has a nil holding requirement, there is still a need to issue a payment summary to the member and the ATO.

“If you think you might be in this situation, you do still need to register PAYG withholding and issue that payment summary and complete the appropriate withholding section on your activity statement,” she explained.

“We are conscious that there is a lack of awareness here and we’ll be issuing web guidance on this and we’ll be writing to all those who are affected to make them aware of their obligations.”

 

Miranda Brownlee
01 March 2019
smsfadviser.com

Site by Plannerweb