From 1 July 2018, all SMSFs must report the following events that affect their member’s transfer balances that occur after 1 July 2017:
- Commencing retirement income streams.
- Pension commutations.
- Certain limited recourse borrowing arrangement payments.
- Personal injury contributions.
This transfer balance account events reporting (T-BAR) will enable the ATO to determine whether both the $1.6 million transfer balance and total superannuation caps have been breached.
The frequency of T-BAR reporting (e.g. yearly or quarterly) depends on the total super balance of a member within the SMSF (and not the SMSF member balance). Therefore:
- SMSFs with members who have total balances of less than $1 million will only have to report yearly when they lodge their SMSF annual return; and
- SMSFs with a member who has a total super balance of $1 million or more will have to report within 28 days after the end of the quarter in which the event occurs (i.e. 28 October is 28 days after 30 September).
Once the frequency of T-BAR reporting has been set, SMSF trustees will not be expected to move between annual and quarterly reporting, regardless of fluctuations in the members’ balances.
Please contact Craig Dangar as soon as possible, because there are penalties involved and your transfer balance account may be adversely affected if you do not lodge your T-BAR report on time (e.g. 28 October 2018).
Proposed denial of deductions if no withholding
Currently, employers and other entities engaging contractors can generally deduct certain kinds of payments (e.g. salary, wages, commissions, bonuses, director’s fees or payments for the supply of services where the contractor has not quoted an ABN) even if the paying entities have not complied with the associated withholding obligations applicable to the making of such payments (e.g. PAYG withholding on the payment of salaries to employees).
It is proposed that from 1 July 2019, paying entities will no longer be entitled to a tax deduction if they failed to withhold amounts under the PAYG system. For example, an employer paying a salary to an employee would not be entitled to a deduction if PAYG was not withheld and notified to the ATO.
However, deductions would still be allowed if an incorrect amount has been withheld and reported to the ATO.
There is also a partial exception from this withholding rule in circumstances of employee/contractor misclassification. For example, if an employer genuinely believed that an employee was actually acting as a contractor – and because the alleged contractor quoted an ABN, the employer would not have been required to withhold (pursuant to the no ABN withholding rule), and therefore would have been entitled to a deduction for the payment.
If a later year ATO audit reveals that the alleged contractor was in fact an employee, there would be no need to amend tax returns for the previous deductions claimed. However, penalties will be imposed for failure to withhold in the past and going forward, the employer will have to withhold PAYG on salary payments made to the “now newly classified employee”.
We will keep you updated on any new developments with this proposed “denial of deductions if no withholding” measure.