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ATO to monitor high-risk LRBAs and TBARs within SMSFs

The ATO is focusing on risky Limited Recourse Borrowing Arrangements (LRBAs) and failures in Transfer Balance Account Reporting (TBAR) in SMSFs this year. They have announced plans to contact trustees with high concentration risks in their funds and to crack down on misreporting.

Limited Recourse Borrowing Arrangements:
LRBAs allow a superannuation fund to borrow under strict conditions. The existing population of SMSFs that have entered into LRBAs, potentially on the basis of poor or conflicting advice, is a key area of concern for the ATO and has been rated a medium to high-risk. In 2017, approximately 95% of the LRBAs were for the purpose of purchasing property. Due to this prevalence, the ATO has concerns about the risk of members’ retirement savings in the event of a property decline.

Transfer Balance Account Reporting:
TBAR is used to advise the ATO when a transfer balance account event occurs within an SMSF, enabling an individual’s transfer balance cap and total superannuation balance to be recorded and tracked. One area of TBAR arrangements the ATO will be monitoring is the reporting of capped defined benefit income streams. In 2018, approximately 86% of SMSFs reporting a capped defined benefit stream had failed in their reporting obligations.

Where the ATO identifies these areas of risky LRBAs and inadequate TBARs for SMSF members, they will contact trustees to ensure that they have understood and mitigated these risks. It would benefit trustees to have in place an adequate strategy that deals with the potential risks involved in LRBAs and be aware of their reporting obligations for transfer balance accounts.

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Your First Tax Return: What You Need To Know

June 15, 2021

Tax return season is quickly approaching for individuals. You may need to begin thinking about the process sooner rather than later to ensure that you have everything ready for your accountant. If you’ve never had to complete a tax return before (and it’s your first time) or are still uncertain about what you need to do, this process can feel a bit like a Mount Everest you need to climb.

Putting it simply, if you are earning or will earn more than $20,542 this year, you will need to lodge a tax return. However, if you haven’t made that amount but your employer has taken tax out of your pay, you should lodge a return anyway to receive some (if not most) of that money back.

How much money you receive back from the tax return will be affected by how much income you have earned. Some debts (such as HECS or HELP) will begin to take money out of your return after reaching a certain income threshold level (currently set at $46,620).

A tax return is where you report all of your income earned over the past financial year. It should include ATO-reported income (which you generally won’t have to worry about as we have access to it automatically) such as salary or non-ATO reported income. This income may be income that has not been sent to the ATO and could include tips, any income you’ve earned while working under an ABN or payments from a family trust. You need to work out all of the income that you have earned and report it to remain compliant with the ATO.

In a tax return, you will also be entitled to make tax deductions on certain items if they apply to your situation. This means that you may receive a greater amount in your tax refund.

You will be entitled to tax deductions on items such as:

If you want to make sure that you understand precisely what you need to do to lodge your tax return, keep this in mind:

For assistance during the lodgement of your tax return, you can seek advice from us. We’re here to help ensure you meet your tax obligations by reporting your income correctly for this financial year.