How One LRBA Reporting Line Can Quietly Push Your Client Over the TSB Threshold

If your SMSF clients hold LRBAs, the way you report them this year could quietly but significantly affect their Total Super Balance (TSB) which now plays a bigger role than ever in shaping contribution strategies, caps, and pension options.

Adviser Tip: As TSB thresholds increasingly determine eligibility for key tax and retirement strategies, even small reporting oversights can trigger major compliance and planning issues.

One overlooked figure in the SMSF Annual Return – Label Y under Part F might be the difference between a green light or red light for a $110,000 contribution. It’s a single line in the return, but it could trigger ATO alerts, blow a client’s contribution cap, or sink a strategy you’ve already scoped.

With SMSF caps frozen and indexation slowing, precision in reporting is now as much about strategy enablement as it is about compliance.

Let’s walk through how to get it right and where to watch for the easy to miss risks.

These rules may seem technical, but they’re already affecting real clients. Especially those close to $1.9M TSB.

 What’s the Rule (and Has It Changed)?

The ATO still requires member level LRBA amounts to be reported under Part F – Label Y of the SMSF Annual Return. This rule hasn’t changed for 2024–25.

Reminder: Even though the rule is unchanged, enforcement scrutiny is increasing, particularly as the ATO targets contributions above thresholds.

But incorrect or missing Label Y reporting remains one of the most common errors we see often due to:

• Reliance on software that doesn’t auto-populate correctly
• Missed or outdated condition of release status
• Assumed 50/50 equity splits despite uneven member balances

Adviser Tip: If you rely on software defaults or delegate reporting to juniors, these assumptions could create hidden risk.

When Is LRBA Reporting Required?

Member-level LRBA reporting is only required when both conditions are met:

1. The LRBA meets one of the following:

The fund entered a new LRBA on or after 1 July 2018

• An existing LRBA was refinanced on or after 1 July 2018 and the loan amount increased
• The LRBA was refinanced to acquire a different asset on or after 1 July 2019

2. The member has ever met a condition of release, including:

• Reaching preservation age
• Ceasing gainful employment
• Retirement
• Permanent incapacity
• Terminal medical condition

2. The member has ever met a condition of release, including:

• Reaching preservation age
• Ceasing gainful employment
• Retirement
• Permanent incapacity
• Terminal medical condition

Note: The member doesn’t need to currently meet the condition of release it only needs to have been satisfied at any time prior to the reporting date.

Adviser Tip: This is often missed. Check member history, not just current status.

Why This Reporting Matters: TSB Impacts and Strategy Risk

Any amount reported under Label Y is included in the member’s Total Super Balance. That figure determines eligibility for:

• Non-concessional contributions (NCCs) capped at $110,000 per year if under $1.9m TSB
• Carry-forward concessional contributions available if under $500,000 TSB
• Spouse contribution tax offsets and Government co-contributions
• Transfer Balance Cap room

Strategic Insight: Label Y affects more than NCCs. Errors here may unintentionally disqualify a client from carry-forward opportunities or tax offsets.

That means an understated (or overstated) LRBA allocation could cause:

• Incorrect contribution caps being applied
• Unnecessary ATO alerts or compliance scrutiny
• Lost strategy opportunities for the client (e.g. downsizer, recontribution, spouse contribution)

For more guidance on optimising end-of-year contributions and preventing strategy loss, see our SMSF EOFY checklist.

Avoidable Fallout: These issues may not surface until long after lodgement, by then, strategies may be irreversible.

Example: A member mistakenly excluded from Label Y reporting has a TSB of $1.89m. Without their $80k LRBA share included, they proceed with a $110k non-concessional contribution—potentially breaching the cap.

Adviser Tip: Always validate final Label Y allocations before any large pre-June 30 contributions are executed.

How to Calculate Each Member’s Share

Once the LRBA is confirmed as reportable, you’ll need to allocate the outstanding loan proportionately to each member based on their 30 June closing balances.

Allocation formula:

(Member’s 30 June Balance ÷ Total Member Balances) × Outstanding LRBA Loan

Example:

• Member A: $700,000
• Member B: $300,000
• Total member balances: $1,000,000
• Outstanding LRBA loan: $400,000

Calculations:

• Member A’s LRBA share = (700,000 ÷ 1,000,000) × 400,000 = $280,000
• Member B’s LRBA share = (300,000 ÷ 1,000,000) × 400,000 = $120,000

Only members who’ve met a condition of release will have their amounts reported in Label Y. In the above example, if only Member A qualifies, only $280,000 would be reported.

Important: Reporting the full loan amount across members regardless of eligibility is a common error flagged by auditors.

If your client’s LRBA involves commercial or residential property, also review our guide on GST and SMSF property transactions.

RBA Reporting: 2024 – 25 Checklist for Accurate TSB Compliance

If you’re preparing SMSF annual returns for 2024–25, use this checklist to ensure LRBA reporting is accurate and your client’s TSB is compliant.

Pro Tip: Integrate Into Your Workflow

Use this checklist as part of your SMSF compliance pack or year-end review notes to prevent TSB misreporting before it happens.

ATO Reference: Reporting LRBAs in the SMSF Annual Return

Confident LRBA Reporting Starts Here

If you’re unsure whether a fund’s LRBA needs to be reported at the member level or want to make sure your numbers stack up correctly SMSF Engine can help.

Time Saver: Many firms outsource Label Y reviews to avoid late-stage rework or audit queries.

Our team supports accountants and advisers with:

• Member level LRBA calculations and Label Y allocations
• Historical condition of release assessments
• Annual return preparation and SMSF compliance
• Full SMSF tax and lodgement services

Audit Ready: We also assist with substantiating condition-of-release status, which is often requested during fund audits.

Whether you need a second opinion or hands on assistance, we can work with you behind the scenes to ensure your clients’ SMSFs reporting is accurate and audit ready.

Partner with SMSF Engine for Confident, Compliant LRBA Reporting

For fast turnaround and technical accuracy, contact our specialist team.

Need a check before 30 June? We can review your Label Y allocations within 3 business days.