Recent changes to the superannuation monitoring and reporting regime means that self-managed superannuation funds (SMSF) will increasingly be required to provide real time and up-to-date data throughout the year as opposed to the more traditional annual reporting.
AH Jackson and Co partner, Elias (Leo) Manicaros said the complex changes which came into effect on 1 July 2017 meant that for most SMSFs a more frequent administration and monitoring regime would be needed than was traditionally required.
“For many people with a SMSF, tax time usually means compiling bank statements, contract notes, portfolio reports, invoices and other information and then sending it off to their accountant who then prepares the financial statements, the tax return and co-ordinates the annual audit,” Leo said.
“For those of us who are organised, this can happen fairly promptly after the 30 June financial year end; for the rest of us, this usually happens many months later.
“Given that most SMSFs are not complicated, an annual servicing has typically met the information and compliance needs of all concerned and more frequent administration or monitoring was not warranted.
“However, this is unlikely to remain the case for much longer considering the complex superannuation changes that came into effect on 1 July 2017.”
Leo said that while many people have been coming to terms with these changes, they only represent the tip of the iceberg.
“The main body of the changes comprises the monitoring and reporting regime that follows,” he said.
“These changes will drive the need for real time reporting and up-to-date data.”
Leo said trustees will now have to deal with the management of such things as:
- the total superannuation balance
- the superannuation transfer balance cap
- bring forward non-concessional contribution
- five-year concessional contribution catch up provisions.
“These changes not only affect how much you can contribute to superannuation, but more importantly, the timing of such contributions. This is important not only for compliance purposes, but also for planning and strategy reasons,” he said.
“If that alone does not provide motivation for change, the ATO has indicated that it is also moving towards event-based reporting for pension phase superannuation.
“This means trustees will soon have to report such things as SMSF asset values, pension commencements, commutations, and other incomings and outgoings in real time, which according to the ATO is likely to be within 10 days.
“At this stage, the ATO has indicated that the new reporting regime will be transitioned into place over the next two years and while acknowledging the difficulties being imposed upon trustees, the proposed reporting model is quite clear.
“Many trustees are already struggling with the increasing complexity of superannuation rules and these changes are unlikely to provide any respite. Despite this, trustees will be left with no choice other than to change their current practices.”
Leo said that fortunately, over the past few years, many of the SMSF software providers have made available such innovations as bank feeds, investment feeds, trustee and advisor cloud access, and more.
“Such developments continue to provide an efficient technology platform to enable SMSF trustees to maintain real time information that not only will ensure they meet their future reporting obligations but will also help trustees navigate the complex superannuation rules to ensure future strategies are well timed,” he said.
“The good news is that a move to real time reporting does not need to cost any more than what is being currently paid for accounting, taxation and administration services.”
AH Jackson and Co can assist you with changing over to a reporting system that will make it easy for you to comply with these impending reporting requirements and manage contribution caps into the future.